The European Commission recently adopted a proposal which should lead to an automatic exchange of all advance tax rulings, including all advance pricing agreements, within the EU starting 2016.

On 18 March 2015, the European Commission ("EC") published a proposal to amend directive 2011/16/EU on enhanced administrative cooperation within the EU (hereafter "the directive"). According to the proposal, EU member states issuing an advance tax ruling, which for this purpose includes any advance pricing agreement ("APA"), must automatically exchange this ruling with all other EU member states as from 1 January 2016. The EC has stated that this proposal is needed because “the lack of transparency on tax rulings is being exploited by certain companies in order to artificially reduce their tax contribution”.

The Netherlands, which has a long-standing and well-developed tax ruling practice, has responded positively to the proposal, but with some reservations.

Types of rulings to be exchanged

The EC proposal is very broad and covers practically every type of agreement, communication, instrument, action, etc., provided that:

  1. It was given by a government body, etc.
  2. It covers the interpretation or application of a legal administrative provision relating to taxes.
  3. It addresses a cross border transaction or presence of a permanent establishment.
  4. It has been made in advance.

The deliberate use of broad terms as "cross border" and "transaction" in this proposal entail that a very large number of agreements and other similar actions are envisaged to fall within the scope of the proposal. Furthermore, there is no "de minimis" rule, i.e., also rulings for small and medium sized enterprises ("SMEs) are in scope. The scope of the proposal is, however, limited to rulings on direct taxes such as corporate income tax, withholding tax, municipal business tax and net wealth tax. Indirect taxes, like value added tax, are excluded. Rulings exclusively addressing individuals (personal income taxes) are explicitly excluded.

Method and timing of exchange

According to the proposal, tax rulings that are being issued as from 1 January 2016 must be exchanged by the issuing member state every three months. Rulings that have been issued within the past 10 years and which are still in force on 1 January 2016 must be exchanged before the end of 2016. The EC proposes to establish a central directory for member states to share the tax rulings.

Information to be exchanged includes:

  • Identification of taxpayer and its group
  • Content and description of issues addressed in the tax ruling
  • Description of a set of criteria used to determine an APA
  • Identification of member states most likely to be affected
  • Identification of any other taxpayer most likely to be affected

Based on a review of the abovementioned information, member states receiving the information may request additional information including the full text of the tax ruling.


Under the current version of the directive which already enables (a spontaneous rather than automatic) exchange of information, member states regularly rely on the confidentiality of information in the ruling (e.g., trade secrets, competition sensitive information, etc.) as a reason not to exchange such information. Under the EC proposal, however, this will no longer be possible. According to the EC, officials of each member state dealing with the information will be bound to official secrecy, thus safeguarding the confidentiality of the information exchanged. The proposal does not contain further concrete measures to minimise the risk of leakage of information, however.

Administrative burden

For companies, no administrative burden is expected according to the proposal. For member states, however, collecting, summarising and exchanging all rulings (under their very broad definition) of all taxpayers going forward, as well as the rulings concluded in the past 10 years that are still in force, appears to create a very large administrative burden. Reviewing and appropriately dealing with all information obtained from the 27 other EU member states appears equally burdensome.

EC vs. OECD proposals

Apart from this proposal from the EC, the OECD has recently also published a proposal for the automatic exchange of tax rulings as part of its Base Erosion and Profit Shifting ("BEPS") action item 5. The differences identified when comparing these proposals are illustrated in the overview below:

Click here to view table.

Practical impact on companies

Tax rulings and APAs have been an important instrument for for companies to obtain advance certainty on their tax affairs and transfer pricing in one or more jurisdictions. The proposed amendment of the directive requires  companies to determine the potential consequences of the proposed automatic exchange of rulings and APAs, for example with respect to information on their technical or trade secrets. As an ultimate remedy, companies could consider to terminate a ruling or APA before the proposal becomes effective, if this is allowed pursuant to the terms and conditions of the ruling or APA. In certain cases, for example where a tax ruling or APA is a "nice to have," companies should weigh the additional level of certainty against the potential adverse consequences of the automatic exchange of information. If the latter could result in a tax audit abroad, a company could also consider to obtain the required level of certainty through a tax opinion or an in-depth transfer pricing study (instead of a tax ruling).

Response of the Netherlands government

The Netherlands, which has a long-lasting and well-developed tax ruling practice, has endorsed the proposal by the EC. However, the Dutch government also made certain critical remarks with respect to some aspects of the EC's proposal. Particularly, the Dutch government called for:

  1. an exception specifically for SMEs;
  2. monitoring task of the EC only (access to database should not be used to start state aid investigations);
  3. alignment of the EU proposal with that of the OECD; and
  4. an extension of the very short term for exchanging the vast amount of (information on) tax rulings.

Next steps

The EC intends to have its proposal adopted before 1 January 2016. Before that date, the proposal will be brought before the European Parliament and the Council of the EU. Within the Council of the EU, the 28 ministers of the various EU member states will have to agree unanimously on the proposal. Although the 28 member states unanimously called for the EC to come with this proposal, it remains to be seen whether they are able to agree unanimously on the exact content of the proposal.