On 30 August 2013 the Dutch State Secretary of Finance and the Minister of Foreign Trade and Developing Cooperation informed the Dutch parliament on the position the Government takes in the parliamentary- and public discussion on international tax avoidance schemes following the outcome of two scientific reports 1 on the role of Dutch holding- and conduit companies in corporate structures of multinational enterprises.
The State Secretary of Finance emphasizes that the international tax avoidance issue should be solved through global solutions rather than unilateral action at national level. The Netherlands will therefore primarily join the coordinated international approach as initiated by the OECD, G8, G20 and the EU, however without losing sight of the economic competitive position of the Netherlands. At the same time the Dutch Government is aware that the Netherland's widespread tax treaty network in combination with its domestic tax legislation is abused in certain international interest and royalty “double non-taxation" schemes. The Dutch Government therefore proposes a number of new unilateral anti-abuse measures in particular directed at (1) conduit companies that are tax resident in the Netherlands and lack sufficient (economic) "substance" and (2) tax treaties with developing countries that lack an anti-abuse clause in their tax treaty with the Netherlands. The new rules will be based on the theme of transparency and exchange of information for tax purposes.
2. New (or sharpened) anti-abuse measures
The Dutch Government proposes the following new measures:
Dutch conduit companies (and APA/ATR practice)
- The existing minimum “substance” conditions (click here) containing amongst others that (1) key management and administration is performed in the Netherlands and (2) the company has a minimal level of equity which fits the functions performed by the company (taking into account assets used and risk borne), will no longer only apply to companies that operate under an ATR but will apply to "any" Dutch company with similar interest or royalty flow- through activities.
- Dutch interest and royalty conduit companies that appear to be "substance" incompliant will be subject to spontaneous exchange of information to the relevant double tax treaty partners.
- Dutch interest and royalty conduit companies that have concluded an APA with the Dutch tax authorities will also be subject to spontaneous exchange of information if the company is part of a multinational enterprise having only the bare minimum "substance" activities in the Netherlands.
- Dutch holding companies of multinational enterprises will only be eligible for an ATR provided that the multinational enterprise at least satisfies (or expects to satisfy shortly) conditions similar to the existing minimum "substance" conditions applicable to Dutch interest and royalty conduit companies.
Tax treaties with developing countries
- The Netherlands shall propose Zambia to renegotiate the rather outdated double tax treaty to give Zambia the opportunity to strengthen its tax position under the treaty with the Netherlands.
- A number of other developing countries will be given the opportunity to include anti-abuse clauses in their existing tax treaties with the Netherlands.
- The Netherlands will propose anti-abuse clauses in all new double tax treaties with developing countries.
- The Netherlands shall technically and financially support tax authorities in developing countries to control the proper use of its tax treaties.
3. Other relevant remarks
In her official comment to the two scientific reports on the involvement of Dutch conduit companies in international tax planning structures the Government arrives at some striking conclusions.
- The use of Dutch interest and royalty conduit companies by multinational enterprises should only be considered against the purpose of international taxation rules if the interest and royalties received as such are on-paid to entities in low tax jurisdictions.
- The number of existing Dutch interest and royalty conduit companies that do not satisfy the existing minimum "substance" conditions seems relatively small.
- The Dutch Government recognizes that certain tax treaties with developing countries lack sufficient anti-abuse clauses and reiterates its opinion that it prefers to include in these treaties specific limitation-on-benefits clauses rather than a general main purposes test clause.
- Tax treaties between the Netherlands and certain developing countries in most cases do not significantly deviated from the tax treaties these developing countries conclude with other countries.
- Given that the Netherlands complies with international transparency and exchange of information standards the Netherlands should not be considered a "tax haven" jurisdiction.
- Neither the Dutch participation exemption nor the Dutch widespread tax treaty network and its advance tax ruling practice is a point of discussion in the international debate on aggressive tax planning.
Although the pressure on the Dutch Government to take appropriate action against the alleged abuse of Dutch conduit companies in international structures was slowly brought to a boil, the Government consequently referred to lateral and supranational solutions rather than unilateral action. On 30 August 2013 the Government nevertheless justifies the announcement of certain new unilateral anti-abuse measures on grounds of its sovereign responsibility in fight against international double non-taxation and with the aim to assist developing countries to fight improper use of their tax treaties. Existing "substance" conditions are sharpened and its scope slightly extended but most important is that neither the Dutch participation exemption regime nor the widespread tax treaty network and the tax ruling practice will be open for further discussion. The new measures give both existing and new Dutch holding- and conduit companies clear guidance in the level of "substance" that is required when operating their business in the Netherlands.
5. Existing list of minimum "substance" conditions (unofficial translation):
- At least 50% of the statutory management board members of the company (with decision making authority) reside in the Netherlands.
- Ten minste de helft van het totaal aantal statutaire en beslissingsbevoegde bestuursleden woont of is feitelijk gevestigd in Nederland.
- The management board members of the company residing in the Netherlands have sufficient professional capabilities within the scope of the core business activities. The duties of the management board include at least the decision making – on the basis of the company’s own responsibility and within the scope of usual group cooperation – of transactions to be closed by the legal entity and an adequate processing of transactions concluded. The company has qualified personnel at its disposal for an adequate implementation and registration of the transactions to be closed by the company.
- De in Nederland wonende of gevestigde bestuursleden beschikken over de benodigde professionele kennis om hun taken naar behoren uit te voeren. Tot de taken van het (gezamenlijke) bestuur behoren minimaal de besluitvorming - op basis van de eigen verantwoordelijkheid van de rechtspersoon en binnen het kader van normale concernbemoeienis - over door de rechtspersoon te sluiten transacties, alsmede het zorgdragen voor een goede afhandeling van de afgesloten transacties. De rechtspersoon beschikt over gekwalificeerd personeel (eigen dan wel van derden) ter adequate uitvoering en registratie van de door de rechtspersoon af te sluiten transacties.
- All key management decisions are taken in the Netherlands.
- De (belangrijke) bestuursbesluiten dienen in Nederland te worden genomen.
- The main bank account of the company is maintained in the Netherlands.
- De (hoofd)bankrekening van de rechtspersoon wordt in Nederland aangehouden.
- All bookkeeping/audit activities take place in the Netherlands.
- De boekhouding wordt in Nederland gevoerd.
- The company is tax compliant in terms of CIT, Wage withholding taxes, VAT etc.
- De rechtspersoon heeft - in elk geval tot het toetsmoment - op correcte wijze aan al zijn aangifteverplichtingen voldaan. Dit kan gaan om Vpb, LB, OB, etc.
- The business address and registered office of the company are located in the Netherlands and, to its best knowledge, the company is not also considered a tax resident in any other country than the Netherlands.
- Het vestigingsadres van de rechtspersoon is in Nederland. De rechtspersoon wordt, naar beste weten van de vennootschap, niet (tevens) in een ander land als fiscaal inwoner beschouwd.
- The company has a minimal level of equity which fits the functions performed by the company, taking into account assets used and risk borne.
- De rechtspersoon heeft minimaal een bij de door de rechtspersoon verrichte functies(waarbij rekening wordt gehouden met de gebruikte activa en de gelopen risico's) passend eigen vermogen.