A recent decision by a district Court in the Netherlands involved a Swiss captive insurance company that did not have any employees. The Court reached the decision that the tax authorities in the Netherlands were correct in levying tax on a related Netherlands taxpayer in respect of most of the company’s profits and in imposing a 50% penalty. This decision is final as no appeal was made against it. The tax authorities had shown that the conditions of the transactions were not at arm’s length. The Court attributed the taxable amounts to the taxable after deducting a 7.5 percent return in respect of the equity of the captive insurance company over the years in question. The Court determined that the structure had been set up with the intention of avoiding Netherlands tax by paying excessive premiums.
