Introduction and background
Towards the end of 2018, the Dutch Ministry of Finance announced that amendments would be made to the international ruling policy. Background of the new policy is to limit the possibility to obtain a(n) (international) tax ruling in case of tax avoidance, insufficient Dutch nexus and in case of transactions with entities in jurisdictions that are either on the EU-blacklist or are located in designated low-tax jurisdictions. On April 23, 2019, the Dutch Ministry of Finance has informed the Dutch House of Representatives on the status of the proposed amendments and provides further guidance and examples of this new ruling policy. On April 24, 2019 the new ruling policy has been discussed in the House of Representatives (outcome of the discussion is yet unknown) and it is intended to publish the policy prior to July 1, 2019 so it can be implemented on July 1, 2019.
Examples of cases whereby rulings are no longer issued
The letter provides several examples of situations in which the Dutch tax authorities intends to no longer issue rulings once the new policy is implemented. The examples can be summarized as follows:
- Situations in which it is apparent that tax avoidance is the single or decisive motive of the structure, such as hybrid structures that create deduction/ no inclusion-situations. The examples provided are all quite obvious and one can therefore wonder how the Dutch tax authorities will decide in cases in which the motive is less clear.
- Situations in which there is insufficient economic nexus in the Netherlands. Unfortunately, the letter does not provide further detail on the (substance) requirements which need to be met in order to have sufficient economic nexus in the Netherlands. The examples do mention that relevant personnel should be present in the Netherlands who perform the operational business activities and that qualified personnel can be hired via an employment agency or from a Dutch group company (the “payroll company”).
- Situations which involve companies that are located in jurisdictions that are either on the EU-black list or are located in designated low-tax jurisdictions. The examples given are fairly strict and unfortunately there is no exemption for genuine business activities.
Please note that the aforementioned terms will be explained in the Decree and will be further specified by way of publishing the anonymized summaries of the rulings after July 1, 2019.
Anonymized summaries of rulings
For transparency purposes, all rulings with an international character agreed upon with the Dutch tax authorities will be made available to the public by way of an anonymized summary. Several examples of such summaries are attached to the letter. In addition, the Dutch Ministry of Finance notes that also summaries of unsuccessful ruling negotiations will be made available.
The Dutch Ministry of Finance published a draft policy document, which outlines the new (international) ruling policy. The procedure to obtain a ruling will differ significantly from the former procedure. Within the Dutch Tax Authorities a coordinating team and committee will be introduced in order to further centralize the procedure of international ruling requests. These teams are responsible for aligning the policy and practice and ensuring consistent quality of content as well as the procedural aspects of international tax rulings. As expected, the rulings with an international character will in principle be valid for a period of 5 years.