NETHERLANDS LAW AND PRACTICE Contributed by: Jimmie van der Zwaan, Rob Langeveldt, Vasisthà Parmessar, Willem Koeleman and Bart-Jan Paardekooper, Borgen Tax
den of proof. The Supreme Court also referred to the OECD Guidelines for the application of the arm’s length principle and transfer pricing methods. The case was about a car importer of an international car brand that incurred a loss relating to import and sales of its most-sold car. However, over the total of goods imported and sold, the car importer remained profitable. The potential existence of offsetting transactions was acknowledged. The tax inspector unsuc - cessfully claimed that the purchase price of the most-sold car was too high. Court of Appeal Amsterdam 20 August 2003, No 01/04083, V-N 2004/30.16 This case concerned a flow-through company with nearly risk-free intra-group borrowing and lending activity. According to the court, a cost- plus surcharge of 10% was appropriate in this case. The Ministry of Finance did not file an appeal in cassation but published that accord - ing to APA practice, the compensation should be related to the loan amount. For loan amounts below EUR100 million, this can be partly deter - mined on a cost-plus basis. Court Arnhem 7 March 2007, No AWB 06/288, V-N 2007/35.6 The court ruled on transfer prices between the taxpayer and its Chinese affiliate. The tax inspector succeeded in proving that the trans - fer prices were not arm’s length in so far as the compensation for the limited procurement activi - ties of the Chinese affiliate exceeded a cost-plus mark-up of 10%. Supreme Court 25 November 2011, No 08/05323 The Supreme Court ruled that if the interest rate on a loan between related parties was not determined in accordance with the arm’s length principle, an interest rate that complies with this
principle must be used to calculate the taxable profit. If it is not possible to find an interest rate for which a third party would be willing to provide the loan under the same conditions and the loan thus de facto becomes a profit-sharing loan, the loan will be labelled non-businesslike ( onzake- lijk ). Such a loan cannot be depreciated for tax purposes. Court of Appeal’s-Gravenhage 13 March 2020, No 17/00714, V-N 2020/25.9 The taxpayer operates an entrepreneurial zinc smelter, being part of an international group. In 2010, it was decided to transfer the group’s headquarter to Switzerland, accompanied by a gradual transfer of functions amongst which was central procurement. At some point the taxpayer qualified its Dutch activities as toll manufactur - ing while the tax authorities took the position that more high-value-adding functions were still involved. The Court of Appeal ruled that the prof - it-split method should be considered an appro - priate method to determine the compensation for the business restructuring and therefore agreed with additional assessments imposed by the tax authorities. After the decision of the Court of Appeal, partly in favour of the tax payer, the parties settled on the arm’s length amount for the compensation. 15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions There are no restrictions on outbound payments related to uncontrolled transactions.
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