On 28 December the Secretary of State for Finance published the ‘final’ blacklist that the Netherlands applies for calendar year 2019, which is amongst others relevant for the newly implemented CFC legislation. In addition, the Dutch Tax Authorities will no longer conclude rulings concerning intra group transactions with entities that are resident in a blacklisted country. In this short update we will cover the consequences for the APA practice, that are not completely clear yet.
In the news item published 28 December 2018 on the Government website, it is stated that rulings will no longer be issued with companies that are resident in jurisdictions that are on the blacklist. We will we have to await when this new measure will finally become effective. In a more extensive letter of the Secretary of State for Finance to the House of Representatives, dated 22 November 2018, it was included that the anticipated new ruling practice would start as of 1 July 2019. It is the ambition of the Secretary of State for Finance for the anticipated amendments to enter into effect at the same time. The anticipated amendments to the ruling practice includes amongst others refusal of access to the ruling practice relating pricing involving entities resident in a blacklisted country. We experienced in practice that APA requests that were already filed before 1 July are still allowed to be finalized. It is not clear whether one can still file new applications.
It is important to note that the Netherlands still continues to apply the arm’s length principle, also with respect to entities resident in blacklisted countries. The big difference is that it is anticipated that from 1 July 2019 onwards, there is no possibility to request advance certainty on transactions involving entities resident in a blacklisted country.
The amended ruling practice furthermore includes amongst others a strengthened substance criterium (“economic nexus”) relating the access to the ruling practice and increased transparency measures. A transparency measure included is publication of an anonymized summary of all rulings. Also the purpose of a certain structure will be taken into account. If the principal purpose is to save Dutch or foreign taxes, no ruling will be granted.
The countries included on the Dutch blacklist are: Anguilla, the Bahamas, Bahrain, Belize, Bermuda, the British Virgin Islands, Guernsey, the Isle of Man, Jersey, the Cayman Islands, Kuwait, Qatar, Saudi Arabia, the Turks and Caicos Islands, Vanuatu and the United Arab Emirates. The blacklist will be updated annually and is anticipated to be updated in October 2019 for the year 2020. This goes on top of the EU blacklisted countries: American Samoa, the US Virgin Islands, Guam, Samoa, and Trinidad and Tobago.
