Since political agreement has now been reached on the ATAD, the Netherlands is required to adopt the proposed measures ultimately by 31 December 2018. In the next months we will have to see how these measures will impact the Dutch corporate tax system. We expect that with respect to the exit taxation rule, the impact will be rather limited since Dutch tax law already contains certain exit taxation rules. These rules, however, do not apply to the transfer of assets from a head office to its branch and vice versa, so it is expected that the Dutch exit tax rules will require some amendment in order to comply with the proposed rule in the ATAD. The measure that was expected to have the most impact in the Netherlands was the switch-over clause, which would have significantly affected the application of the Dutch participation exemption regime. Since the switch-over clause was dropped in the final version of the ATAD, the impact on the Dutch participation exemption regime should be minimal to none. Also the EU anti-hybrid mismatch rule should not have significant impact since Dutch rules already provide for anti-abuse measures in case of mismatches with hybrid instruments, most recently introduced following an amendment to the EU Parent-Subsidiary Directive. However, payments by a Dutch company to hybrid entities could potentially be affected by this rule, if the Netherlands will deny the deduction where such payments are not included in the tax base of the hybrid entity in the other Member State. As to the new GAAR rule, its impact remains to be seen, but so far the Dutch government expressed that the introduction of such a rule in Dutch legislation should not have major impact since the Netherlands already acts in accordance with that rule on the basis of the "fraus legis" concept developed in Dutch case law.
The interest deduction limitation rule and the CFC rule, however, are expected to affect the Dutch corporate tax system. So far, the Netherlands has always expressed its preference for specific anti-abuse measures in relation to interest deduction (rather than a general interest barrier rule or thin cap rule). Therefore currently the Dutch corporate tax act includes mainly specific interest deduction limitations in the context of acquisition debt and debt push-down. However, the proposed EBITDA based rule would have to be implemented (ultimately by 2024) and it will be particularly important to see whether this rule would replace some of the existing (specific) rules or whether it would be introduced in addition to already-existing rules. No guidance has been given yet in this respect, but it could very well be that some specific interest deduction limitation rules will be abolished and replaced by this generic rule. The CFC rule would be rather new in Dutch tax law, currently there is only a very limited version in the participation exemption in case of certain low-taxed passive subsidiaries with over 90 percent of the subsidiary’s activities being passive. The CFC rule in the ATAD can be implemented in various ways as it gives multiple options for Member States to choose from, so it will remain to be seen how the Netherlands will implement it, but the fact that application of this rule relies to a large extent on the tax rate in the controlling Member State means that for the Netherlands, with its 25 percent corporate tax rate, the threshold is set higher than in some other Member States with lower corporate tax rates. The Netherlands government recently indicated that they are carefully considering a potential reduction of the headline tax rate.