On April 23, 2019, the Dutch State Secretary of Finance published a (draft) decree on the Dutch tax ruling practice pertaining to tax rulings with an international character (the "Decree"). The publication of the Decree follows on the letter by the State Secretary of Finance published on November 22, 2018 in which he announces the implementation of new measures to update the Dutch tax ruling practice for cross-border structures. This announcement was covered in our previous alert.

The measures in the Decree are focused on contents of rulings, the ruling process and transparency. The key elements of these measures are summarized below.

It is envisaged that the Decree will enter into force as of July 1, 2019. As part of the legislative process the debate on the Decree in the House of Representatives will take place on June 4, 2019.

1. Content

Taxpayers wishing to obtain an international tax ruling are required to observe the following conditions:

  • The taxpayer requesting a ruling needs to be part of a concern that has so-called "economic nexus" with the Netherlands, meaning that its presence needs to relate to operational activities in the Netherlands that are carried out for the benefit and the risk of the taxpayer. These activities need to fit with the function of the taxpayer. For example, consideration must be given to whether the company employs enough people in relation to its overall size and/or its activities in the Netherlands. As an exception to this main rule, in the event that the taxpayer requests a ruling in relation to the Dutch non-resident taxation rules (art. 17 and art. 17a of the Corporate Income Tax (CIT)) such economic nexus is not required. For example, a Luxembourg tax resident company owning an interest in a Dutch holding company can obtain a ruling on the Dutch non-resident taxation rules irrespective of whether the Dutch holding company has economic nexus in the Netherlands.
  • A ruling will not be granted if:

i) the sole or primary purpose of the transaction is to save Dutch or foreign taxes; or

ii) the direct transaction relates to an entity or a permanent establishment located in a jurisdiction that has been included on the so-called 'Dutch blacklist' of 21 low-taxed jurisdictions and non-cooperative jurisdictions.


Under the new Decree, international tax rulings can be issued with a maximum term of five years. Exceptions are possible in case facts and circumstances require rulings with a longer applicable term (e.g. in cases where long-term contracts are entered into). In those cases, a maximum term of ten years may be applied, where halfway through the term of the ruling an evaluation will occur.

Required Information

The taxpayer that wishes to obtain a ruling is required to submit all information that is reasonably required to adequately assess the ruling request. The extent of the information required and the level of detail should be determined on a case-by-case basis.

In case of an Advance Tax Ruling (ATR) request, the information provided should generally include a detailed description of the relevant facts and circumstances, an overview of all parties, jurisdictions and financial years involved, a brief historic and organizational overview of the structure or the concern, the position a taxpayer wishes to take / the tax consequences pertaining to that position and a statement that the beneficial owners / directors involved with the structure are not resident in a jurisdiction on the 'EU-sanction list'.

In case of an Advance Pricing Agreement (APA) request, additional information may be required in the form of the group's transfer pricing 'Master File', financial details of the transaction, the transfer pricing methodology used (and why such methodology is appropriate in the relevant case), key assumptions made underlying the analysis, a description of how changes in facts and circumstances would affect the outcome or the term during which the APA would remain applicable, the contractual terms and conditions to the inter-company relations, the company's business strategy and a description of the applicable market conditions.

Furthermore, the taxpayer has to include an analysis from which it follows that it satisfies the aforementioned requirements to obtain a ruling (economic nexus is present in the Netherlands, tax savings is not the sole or primary reason for the structure or there is no direct relation with a low-taxed or non-cooperative jurisdiction involved).

2. The application process

The new Decree contains a fairly detailed description of what the application process will look like and which parties and agencies in the government play a role in each step of the process. As part of the process a new committee within the Dutch Tax Authorities (the "Committee on International Fiscal Assurance" or "C-IFA") will be appointed, which will be involved with and responsible for the issuance and coordination of all (Dutch) international tax rulings, to satisfy the need to i) increase transparency; (ii) centralize the ruling process; and (iii) harmonize the content of international tax rulings with respect to cross-border transactions. This C-IFA will replace the existing ATR/APA team.

General ruling process

Within the Dutch tax authorities there are several parties that are involved in the process for issuing rulings that contain cross-border elements. Which party is involved and what the application process looks like depends on the nature of the request.

  • A ruling request should generally be submitted with the 'normal' tax inspector competent to deal with the relevant taxpayer. This tax inspector will subsequently involve the so-called "Handling Team"in the International Fiscal Assurance when the ruling pertains to certain subjects (see below) (i.e. the "Normal Route"); or
  • In the case of a potential new foreign investor, the ruling request should be filed with the so-called "Greenfield Team" (i.e. the "Greenfield Route");

Topics for which the Handling Team needs to be involved are as follows:

  • Application of the Dutch participation exemption;
  • Qualifications of hybrid entities or instruments for Dutch tax purposes;
  • The application of the (recently implemented) Dutch CFC rules;
  • The (non-)applicability of Dutch non-resident tax rules;
  • The existence of inbound or outbound permanent establishments ("PE"s) and profit allocation to such PE;
  • The qualification of a Dutch 'cooperative' as withholding agent for dividend withholding tax purposes;
  • The application of the so-called 'principal purpose test' in tax treaties (in view if implementation of the 'multilateral instrument' (or "MLI");
  • The arm's length nature of intra-group transactions;
  • Whether or not entities are to be seen as 'affiliates' that are subject to transfer pricing rules; and
  • Whether transactions are to be viewed as 'group services' (generally resulting in taxable remuneration) or should be viewed as activities conducted within the capital domain (i.e. not taxable).

Responsibilities of C-IFA

These 'first handlers' will liaise with C-IFA, and will jointly coordinate with the relevant knowledge groups within the Dutch tax authorities on the matters at hand where necessary.

C-IFA is responsible for central coordination pertaining to international rulings, and needs to be involved in all international ruling requests to (i) safeguard cohesion in policy and implementation, (ii) to ensure high quality and standards of rulings issued, and (iii) to ensure correct application of (case) law, and (procedural) rules. Ruling requests submitted to the 'first handlers' should always be presented subsequently to the C-IFA for approval. A successful application process results in a so-called 'settlement agreement' (i.e. the Ruling) between the taxpayer and the Dutch tax authorities.

3. Transparency

In an attempt to increase transparency, every Dutch tax ruling covering international elements will be summarized and made publically available. These summaries will include basic facts and circumstances, the main conclusions from transfer pricing reports or other supporting documents that are relevant to the topics at hand, and a brief analysis on the basis of applicable law and legislation leading to the conclusions reached in the final ruling.

If a request to issue a ruling is denied or rejected, a summary will also be published, from which it can be deduced why no ruling could be issued in that instance.

Taxpayers are assured that the above-mentioned summaries will be anonymized in such a way that third parties will not be able to identify the parties involved in the ruling request.

Key Takeaways

The Dutch tax ruling practice has a long and well-established track record of being very investor-friendly. The Dutch tax authorities generally take a cooperative position and think along with taxpayers where they can support the idea of giving upfront certainty to (foreign) taxpayers in the form of an ATR or APA. This is evidenced by the fact that in 2018, roughly 85-90% of the ATR and APA requests have resulted in a positive ruling being issued. This high success rate is the result of the fact that the Netherlands has a stable and transparent government, and of the continuous alignment of the Dutch tax rules with international and OECD standards.

The implementation of the Decree does not signify a change in this investor-friendly approach. Further, it is noteworthy that when announcing the implementation of the Decree the State Secretary of Finance mentions repeatedly that it is the aim of the Dutch government to ensure that the Netherlands remains an attractive jurisdiction for investments pertaining to real activities. The corporate income tax rate is decreasing (to 20.5%), and other incentives are available for 'real' businesses. In those cases, the aim of the Netherlands is explicitly to not hinder cross-border activities.

The purpose of the Decree is to ensure that the Netherlands remains an attractive jurisdiction for (foreign) investors and to prevent abusive situation where taxpayers use the Netherlands as a so-called 'conduit jurisdiction' for directing funds and assets to tax havens. The proposed measures are part of the Dutch government's aim to make substantial changes to Dutch tax law in the years to come, in order to prevent the Netherlands from being used as a so-called 'conduit jurisdiction' to tax havens. In that respect, these measures show a solid effort to combat abuse.

It should be kept in mind also that tax rulings can provide a certain level of comfort, but that they are not mandatory. Non-controversial structures can be operated perfectly fine without obtaining a tax ruling.