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Advance pricing agreements
Availability and eligibility
Are advance pricing agreements with the tax authorities in your jurisdiction possible? If so, what form do they typically take (eg, unilateral, bilateral or multilateral) and what enterprises and transactions can they cover?
In the Netherlands, an advance pricing agreement team deals with requests for such agreements. Bilateral advance pricing agreement requests are a possibility, a copy of which will be sent to the competent department within the Ministry of Finance, which will subsequently send the request to the other country involved. It is also possible to request a multilateral advance pricing agreement. When one or more countries do not want to cooperate, the request will be handled as a request aimed at concluding multiple bilateral advance pricing agreements.
An advance pricing agreement request can cover all intercompany transactions of the taxpayer and multiple associated enterprises. This does not mean that a request will be handled in isolation; all relevant facts and circumstances will be taken into account. For instance, where a taxpayer incurred losses in the past and the tax authorities challenge these losses, an advance pricing agreement request can in practice be put on hold.
According to the Transfer Pricing Decree, there is also a possibility to ask for certainty in advance from the local tax inspector as to whether an activity qualifies as either intra-group services for the benefit of group companies or an activity carried out as a shareholder.
Rules and procedures
What rules and procedures apply to advance pricing agreements?
The advance pricing agreement request must be sent to the local competent tax inspector with a copy to the advance pricing agreement/advance tax ruling team located in Rotterdam. In practice, the request is frequently sent directly to the advance pricing agreement team. A case management plan will then be agreed between the taxpayer and the tax authorities. In this way, the taxpayer can make a realistic estimation of the time that it will take to conclude an advance pricing agreement. The tax administration endeavours to minimise the time that it takes to conclude agreements. There is a possibility to ask for a pre-filing meeting, in which the information that is especially of interest and the elements to be scrutinised are discussed.
How long does it typically take to conclude an advance pricing agreement?
In general, the tax authorities endeavour to conclude advance pricing agreements within eight weeks. However, complex cases might take longer in practice.
What is the typical duration of an advance pricing agreement?
According to the Advance Pricing Agreement Decree, the term for the agreement can be based on the request of the taxpayer. In general, an advance pricing agreement will cover three to five years.
The taxpayer may file a request for the extension of the term of the agreement.
What fees apply to requests for advance pricing agreements?
No fees are charged for the advance pricing agreement process.
Are there any special considerations or issues specific to your jurisdiction that parties should bear in mind when seeking to conclude an advance pricing agreement (including any particular advantages and disadvantages)?
The advantage of concluding an advance pricing agreement is certainty about the tax authorities’ acceptance of the taxpayer’s transfer pricing system. It can also be expected that the tax authorities will defend the taxpayer’s case in any upcoming mutual agreement procedure.
Some companies perceive it to be a disadvantage that the ruling will be exchanged with EU and Organisation for Economic Cooperation and Development countries that are connected to the entity with which the ruling is concluded.
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