On 11 and 15 September 2015, Dutch Government released Tax Bills. The Tax Bills include implementation of EU Parent Subsidiary Directive amendments (i.e. general anti-abuse rule and anti-hybrid rule) into Dutch law, introduction of a step-up for dividend withholding tax purposes for cross-border legal (de)mergers, and implementation of the OECD’s Country-by-Country Reporting and Common Reporting Standard into Dutch law. Although these proposals of law may be amended during the course of the legislative process, it is expected that they will take effect as of 1 January 2016.

Implementation of amendments to EU Parent Subsidiary Directive

The Tax Bills include amendments to implement the anti-hybrid rule and the general anti-abuse rule (GAAR) as introduced in the EU Parent Subsidiary Directive (PSD). The anti-hybrid rule and GAAR were summarised in our Tax Flash of 25 November 2013.


It is proposed to implement the GAAR via the existing corporate income tax rules for non-Dutch-resident taxpayers (Non-Resident Rules; see for a summary our publication Genoteerd of March 2012) and via the dividend withholding tax rules for Dutch resident cooperatives.

The Non Resident Rules are reworded in order to bring them in line with the GAAR. The explanatory notes to the Tax Bills state, similar to the existing rules, that the Non-Resident Rules do not apply if the non-Dutch-resident entity conducts an enterprise to which its substantial interest in the Dutch-resident entity is attributable or if it fulfils a strategic management function as top holding company of an active group. Furthermore, the Non-Resident Rules do not apply to intermediate holding companies that do not carry on an enterprise but have a linking function, provided that they have sufficient substance. For that purpose, the explanatory notes introduce the condition that such non-Dutch-resident entity owning the substantial interest should meet minimum substance requirements similar to the substance requirements applicable to a Dutch holding company seeking an advance tax ruling. For a description of these substance requirements, we refer to our Tax Flash of 12 June 2014.

The Tax Bills contain similar proposals to reword the existing anti-abuse provision for dividend withholding tax purposes applicable to Dutch-resident cooperatives, to bring it in line with the GAAR.

The proposals cover both EU and non-EU situations and do not implement the GAAR into the participation exemption regime. In addition, Dutch government takes the position that bilateral tax treaties concluded by the Netherlands are in principle not affected by the implementation of the GAAR.

Anti-hybrid rule
The anti-hybrid rule aims to prevent double-non taxation via the use of hybrid financing. Dutch government proposes to implement the anti-hybrid rule into Dutch tax law via the participation exemption rules (as well as via the credit rules for low-taxed passive subsidiaries).

The participation exemption is no longer applicable to payments, or other forms of remuneration, received from a ‘subsidiary’ to the extent that these payments are, legally or de facto, directly or indirectly, deductible for corporate income tax purposes. The rule applies to payments that are actually deducted and to payments that are, ‘by their nature’, deductible. For example, the rule also covers payments that are non-deductible as a result of a general (interest) deduction limitation.

Furthermore, the proposed anti-hybrid rule has worldwide application (i.e., not restricted to EU subsidiaries), is not limited to hybrid loans (e.g., preference shares may be covered), applies to payments of accrued income included in the cost price upon acquisition, and applies to income received in lieu of payments covered by the anti-hybrid rule (e.g., capital gains on a disposal of (solely) an entitlement to covered income). 

Capital gains, including currency results, are not intended to be covered by the anti-hybrid rule. No grandfathering rules are proposed for existing financing arrangements.

Step-up for dividend withholding tax with respect to cross-border legal (de)mergers

For cross-border legal mergers into a Dutch company, it is proposed that the recognized capital of the Dutch company will be increased with the fair market value of the assets (excluding shares in a Dutch-resident company) transferred to that Dutch company under the merger (“step-up”). As a general rule, only future distributions exceeding such recognized capital should become subject to dividend withholding tax. For cross-border legal demergers similar rules are proposed. No step-up is granted if the merger or demerger is predominantly aimed at avoiding or deferring taxation. This is in line with existing rules for cross-border share-for-share exchanges.

Country-by-Country Reporting and transfer pricing documentation

Under the Tax Bills, a Dutch-resident ultimate parent entity of a multinational enterprise group should file a ‘country-by-country report’ if the consolidated turnover of the group is at least EUR 750 million in the preceding year. The same applies to Dutch taxpayers (either an entity or a permanent establishment) if the Netherlands does not receive a country-by-country report from another country. These rules are in line with the model legislation included in the Country-by-Country Reporting Implementation Package released by the OECD on 8 June 2015 (we refer to our Tax Flash of 9 June 2015 for a summary).

In addition, Dutch taxpayers that are part of a multinational enterprise group with a consolidated turnover of at least EUR 50 million in the preceding year, should prepare a OECD-style ‘master file’ and a ‘local file’ for transfer pricing and branch allocation documentation purposes. This proposal aims to implement the Guidance on Transfer Pricing Documentation released by the OECD on 16 September 2014 (we refer to our Tax Flash of 17 September 2014 for a summary).

These rules apply to book years starting on or after 1 January 2016. Dutch taxpayers that are not obliged to prepare the master file and local file, continue to be subject to the current transfer pricing documentation rules.

Common Reporting Standard

It is proposed to implement the OECD’s Common Reporting Standard (CRS) and the revised EU Directive on Administrative Cooperation (EU Directive 2014/107) (DAC) into Dutch law. Dutch financial institutions need to comply with additional due diligence rules for their accountholders and, in the case of investment entities, concerning their shareholders as well. Furthermore, the proposal contains new reporting rules for Dutch financial institutions in respect of financial accounts held by persons who are resident for tax purposes in an EU member state or a country participating to CRS. The proposal to implement the CRS into Dutch law is based on the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (see our Tax Flash of 30 October 2014). The revised DAC effectively implements CRS into European law.