NETHERLANDS LAW AND PRACTICE Contributed by: Friederike Henke, Ingrid Cools, Philip ter Burg, IJsbrand Uljée, Suzan van de Kam and Epke Spijkerman, BUREN
5.7 Anti-Evasion Rules Dutch corporate income tax law includes various rules targeting tax evasion, such as limitation of interest deduction rules preventing tax base ero - sion, controlled foreign companies (CFC) legisla - tion, exit taxation and the non-resident corpo - rate income tax rules (see 5.2 Taxes Applicable to Businesses ). Furthermore, there are various Dutch dividend withholding tax rules targeting tax evasion, such as anti-dividend stripping rules and certain other anti-abuse rules (see 5.2 Taxes Applicable to Businesses ). Finally, Dutch tax law includes an unwritten gen - eral anti-abuse rule (fraus legis). Some of these anti-evasion rules are listed below. Limitation of Interest Deduction Rules – Anti- Tax Base Erosion Rules Under the Dutch anti-tax base erosion rules, the deduction of interest expenses (including cur - rency results and other costs) is limited to related party loans that have been used to finance: • profit distributions or repayments of capital to related parties; • capital contributions to related parties; or • the acquisition of certain share interests. There are, however, exceptions under which the interest deduction limitation rule does not apply (eg, if the loan and the transaction are based primarily on business reasons). CFC Legislation Under the CFC rules, undistributed “tainted” (passive) income derived from subsidiaries or permanent establishments that are tax resident in certain blacklisted jurisdictions (ie, the juris - dictions referred to under 5.2 Taxes Applicable
to Businesses : ”Conditional Withholding Tax”) is, in principle, annually included in the taxable basis of the Dutch taxpayer (subject to certain conditions). Only interests of 50% in direct or indirect subsidiaries or permanent establish - ments of Dutch taxpayers together with related companies are targeted. Exit Taxation If Dutch resident corporate taxpayers transfer their tax residencies to other jurisdictions or transfer assets to non-Dutch permanent estab - lishments, the assets and liabilities must be stated at fair market value. Any gains (ie, hidden reserves, goodwill and/or currency exchange gains) will, in principle, be subject to corporate income tax. Under certain conditions, it is pos - sible to apply an extended payment deadline. General Anti-Abuse Rule (Fraus Legis) Under the legal concept of fraus legis, transac - tions can be eliminated for Dutch tax purposes or replaced by other transactions. Fraus legis can be applied if the Dutch tax authorities prove that the sole or predominant motive for a trans - action is tax avoidance, and that the envisaged tax consequences of a transaction conflict with the purposes and rationale of the relevant law. As per 1 January 2025, the General Anti-Abuse Rule (GAAR) from the first EU anti-tax avoid - ance Directive (ATAD1) has been incorporated into Dutch tax law on request from the European Commission. The interpretation of the GAAR is similar to fraus legis and it is not intended to make any substantial changes to the current legal practice. Anti-Hybrid Rules Dutch tax law includes anti-hybrid rules imple - menting the amended Anti-Tax Avoidance Direc - tive (ATAD2). These rules include limitation of deduction rules under which hybrid mismatches
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