The Netherlands focuses on transparency and substance rules to avoid abuse of tax treaties

2013-08-30

This evening, the Underminister of Finance of the Netherlands sent a letter to Dutch Parliament on the role of the Netherlands in international tax planning and an investigation with respect to abuse of tax treaties between the Netherlands and developing countries.

The Underminister of Finance repeats that the Netherlands will actively cooperate with the OECD BEPS Action Plan (published on July 19, last). Any measures in this respect should be taken globally (or at EU level) and not by the Netherlands on its own account, so that they will be binding upon all states, ensuring a level playing field between the different states and enterprises. Still, the Underminister proposes that the Netherlands will take the following measures on its own account, in anticipation of the international measures:

1. Certain measures to avoid the use of tax treaties by companies of groups with insufficient links to the Netherlands;
2. Propose to all 23 developing countries with whom the Netherlands have concluded a tax treaty (or with whom the Netherlands have entered into treaty negotiations) that anti-abuse rules will be implemented and enter into renegotiations with Zambia to update the tax treaty.

The measures listed in the letter to avoid the abuse of tax treaties re. 1 above, include:

a) The minimum substance requirements for obtaining an ATR/APA for certain financing/royalty companies will also apply for such companies without an ATR/APA; 
b) These minimum substance requirements will not only apply to financing/royalty companies, but also to holding companies that wish to apply for a ATR/APA;
c) If the minimum substance requirements will not be met, the Netherlands will spontaneously exchange information with the source state; the Netherlands will also exchange information under APA’s with financing/royalty companies, if the group, of which the respective financing/royalty company forms part, does not have any other activities in the Netherlands than the activities performed by the respective company, even if the minimum substance requirements are met.

Finally, the Underminister announces that the supervision on professional service providers (Trust companies) will become more strict.