Dutch measures against
unintended use of
tax treaties
June 2014
In 2013, the Dutch Cabinet already announced a number of measures against the unintended use of tax
treaties in combination with Dutch legislation. On January 1, 2014, legislation took effect regarding the
unprompted disclosure by service entities (dienstverleningslichamen; “DVLs”) of information relating to
themselves for the exchange of information with other countries. Other measures mentioned concern
exchanges of Advance Pricing Agreements (“APAs”) in certain circumstances and the imposition of
conditions for the processing of applications from holding companies (Advance Tax Rulings, “ATRs”). In
connection with the latter two measures, the APA/ATR decrees from 2004, including the DVL decree and
the corresponding question and answer decree, were recently updated and published in the Staatscourant
on June 12, 2014.
1. Duty of disclosure of service entities
Service entities and advance certainty
In short, service entities are Dutch resident companies whose main activities involve the intra-group
receipt and payment of foreign interest, royalties, and rental or lease payments. A service entity can
request the Dutch Tax and Customs Administration to provide advance certainty on the tax consequences
of proposed related transactions. The conditions for obtaining advance certainty are laid down in a decree.
These conditions provide for an actual presence in the Netherlands, i.e. substance requirements, and the
actual risks that must be borne as a result of the functions performed.
2014 legislation
By virtue of the legislation effective from January 1, 2014, the substance requirements (see below) apply
to all service entities, irrespective of whether or not advance certainty was requested. All service entities
must also inform the Dutch Tax and Customs Administration whether they meet these requirements by
answering a question in their corporate income tax return. The holding of participations will not be taken
into account when determining which part of the total activities is performed by the service entity. If a
service entity meets all the requirements, it can suffice with a statement to this effect. A service entity
that does not meet all the requirements must indicate – separately – which requirements have not been
met, as well as providing all the necessary information for assessing whether the substance requirements
have been met. What information will in any case be required may be elaborated in more detail in a
policy decree. If not all the requirements have been met, additional information must be provided on, for
example, payments received and the countries in which the service entity can invoke or rely on a rule for
the avoidance of double taxation, the Interest and Royalty Directive or a national provision implementing
that Directive.
The Dutch Tax and Customs Administration will exchange the information it receives with the country
in question. This will enable the other country to determine whether the applicable rule can indeed be
invoked.
An important point is that the abovementioned notification and – if not all the requirements have been met
– the additional information need not be provided if the service entity has not invoked or cannot invoke a
tax treaty, directive, etc.
There are still some uncertainties, for instance as regards concurrence with holding activities and the
weighting of the substance requirements.
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Dutch measures against unintended use of tax treaties
Substance requirements
The substance requirements can be summarized as follows:
a) at least half of the statutory board members with decision-making authority live or are resident in the
Netherlands;
b) the board members living or resident in the Netherlands possess the required professional expertise
to properly perform their tasks;
c) the taxpayer employs qualified staff;
d) management decisions are taken in the Netherlands;
e) the taxpayer’s most important bank accounts are held in the Netherlands;
f) the financial records are kept in the Netherlands;
g) the taxpayer’s registered office is located in the Netherlands;
h) the taxpayer is not regarded as a tax resident in and by another country;
i) the taxpayer runs a real risk within the meaning of the law;
j) the amount of equity held by the taxpayer is at least appropriate for the required actual risk.
Tax return and penalty
As of January 1, 2014, the service entity must provide the abovementioned mandatory information no later
than the date on which it files its corporate income tax return. If the service entity fails to do so or fails to
do so on time, this will be regarded as an offense. A maximum penalty of EUR 20,250 can be imposed for
breaches arising from misconduct or gross negligence.
2. Exchange of APAs in cases of minimum substance
It appears from the DVL decree of June 3, 2014 that the Dutch Tax and Customs Administration will
spontaneously exchange information about APAs for service entities (including extensions) agreed with
taxpayers with foreign tax authorities in cases in which the group to which the service entity belongs:
i.
does not perform any activities in the Netherlands beyond those pertaining to the minimum substance
requirements in the Netherlands; and
ii. has no specific plans for an expansion of the substance in the Netherlands.
The above applies to applications submitted after January 1, 2014.
3. Holding companies
In the context of a review of capacity utilization at the Dutch Tax and Customs Administration, a measure
in respect of holding companies was also implemented by means of the ATR decree of June 3, 2014.
Requests for advance certainty on topics referred to in the decree pertaining to intermediate holding
companies and top holding companies in international structures are in principle only dealt with if:
i. the requesting body meets the substance requirements in the Netherlands laid down in the decree; or
ii. the group to which the requesting body belongs is engaged in operating activities in the Netherlands
or has specific plans to do so.
If a Dutch body acts in the capacity of director of the body for which advance certainty is requested, both
bodies must meet the substance requirements in the Netherlands laid down in the decree.
KPMG Meijburg & Co
June 2014
The information contained in this memorandum is of a general nature and does not address the specific circumstances
of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be
no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the
future. No one should act on such information without appropriate professional advice after a thorough examination of
the particular situation.
© 2014 KPMG Meijburg & Co, Tax Lawyers, is an association of limited liability companies under Dutch law, registered
under Chamber of Commerce registration number 53753348 and is a member of KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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Dutch measures against unintended use of tax treaties