Netherlands: Advance tax rulings; changes possible before April 2016

Netherlands: Advance tax rulings; changes possible

A Ministry of Finance decree published on 11 November 2015 provides follow-up guidance concerning advanced tax rulings issued by the Dutch tax administration.

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Background

Adopted in July 2014, an amendment to the EU Parent-Subsidiary Directive addresses mismatches resulting from hybrid financing, and involves the inclusion of an anti-hybrid provision. Under this amendment, the EU Member State of the parent company must tax any profit distributions that the parent company receives from its subsidiary in another EU Member State, to the extent that the profit distribution is deductible by the subsidiary. In addition, a second amendment was adopted in January 2015 that involves a general anti-abuse provision. The EU Member States must implement these measures before 1 January 2016. 

Dutch implementation

The November 2015 decree provides follow-up information concerning the period during which advance tax rulings can be modified. Because of the expected adoption and implementation of the amended EU Parent-Subsidiary Directive into Dutch law, certain advance tax rulings would be affected and would no longer be valid. Specifically, this would affect rulings on the absence of:

  • A foreign corporate income tax liability in respect of a holding or ownership of a substantial interest in an entity resident in the Netherlands
  • A dividend withholding tax obligation for cooperatives

There are no transition provisions. Accordingly, as of 1 January 2016, it would be necessary, in certain situations, for the foreign entity or direct member performing a “linking function” to possess “sufficient substance,” or the advance tax ruling would effectively cease to apply.

However, the November 2015 decree provides certain relief, if the taxpayer:

  • Writes to the APA/ATR team of the Dutch Tax and Customs Administration / Large Enterprises Division (Rotterdam office) before 1 January 2016
  • States an intention to comply with the substance requirements before 1 April 2016
  • Acknowledges that the advance tax ruling will cease to apply on 1 January 2016 if the substance requirements are not met before 1 April 2016
  • Notifies the APA/ATR team of the Dutch Tax and Customs Administration/Large Enterprises Division (Rotterdam office) before 1 May 2016 whether the substance requirements have been met

Dividends taxation

The decree also states that because there is no provision for transitional rules, dividend distributions from or disposals of the substantial interest or the proceeds from the membership rights in a cooperative, for the period from 1 January 2016 to the date when when the substance requirements are met, would be subject to tax (subject to applicable treaty provisions). Therefore, the subject advance tax rulings would not immediately cease to apply on 1 January 2016.

 

Read a November 2015 report prepared by the KPMG member firm in the Netherlands: Decree approving ATRs: modification possible until 1 April 2016 

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