On 23 April 2019, the Dutch Undersecretary of Finance published a draft Decree containing regulations for the previously announced new Dutch international tax ruling practice. The draft Decree would be effective 1 July 2019. A version of a revised international tax ruling practice was previously announced in November 2018.
The purpose of the revision would be to provide a more transparent ruling practice and to enhance the quality of tax rulings for taxpayers with “real activities.” The revised tax rulings policy would also describe situations when the tax authorities would not conduct preliminary consultations (so that no ruling could be issued) such as situations when:
- The taxpayer applicant has insufficient economic nexus in the Netherlands.
- Tax saving (whether Dutch tax or foreign tax) is the sole or primary reason for the subject transaction.
- A party to the transaction is established in a country that is on the Dutch list of low-tax and non-cooperative countries.
An annex to the 23 April 2019 letter provides a number of examples to illustrate these non-ruling factors.
APAs and tax rulings process
To implement the new tax rulings policy, a new body—the International Fiscal Security (IFZ) College would be formed and would be responsible for coordinating preliminary consultations with taxpayers seeking international tax rulings. The College would be responsible, among other things, for maintaining the unity and implementation of the revised tax rulings policy.
Requests for bilateral or multilateral APAs would be addressed directly to the International Tax Department (Internationale Zaken en Verbruiksbelastingen (IZV)) of the Ministry of Finance. The IFZ College team would be involved in an advisory role in applications for bilateral APAs.
Economic nexus
An important measure in the revised tax ruling policy would be the tightening of the “substance requirements.” The current list of substance requirements would be replaced by a criterion for “economic nexus” in the Netherlands.
Transparency
The aim for greater transparency with respect to international tax rulings would be satisfied with the publication of a summary of all rulings granted. An annex to the 23 April 2019 letter to the Lower House sets out how such summaries could be provided. Finally, the revised tax ruling practice is expected to be discussed in the Lower House, and at present it is on the agenda for discussion on 4 June 2019. Whether this discussion would result in any adjustments to the proposed tax rulings policy is uncertain.
