The Finance Minister of Algeria has announced that representatives of Algeria and the Netherlands met on 31st July 2017 to discuss bilateral relations and strengthening the relationship through the conclusion of an income tax treaty. The treaty must be finalized after negotiation, signed, and ratified before entering into force.
According to an IRS announcement on its website, the competent authorities of U.S. and Netherlands have concluded an arrangement on the exchange of Country-by-Country Reports. The competent authority arrangement (CAA) for exchange of country-by-country reports is on the basis of a double tax convention (DTC). The agreement was signed on 11 April 2017.
Under the arrangement, the first fiscal year for which the U.S. and Netherlands intend to exchange CbC reports is the fiscal years of MNE Groups commencing on or after January 1, 2016. The CbC report is intended to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. CbC reports with respect to fiscal years of MNE Groups commencing on or after January 1, 2017 are intended to be exchanged as soon as possible and no later than 15 months after the last day of the fiscal year of the MNE Group to which the CbC report relates.
The Competent Authorities intend to exchange the CbC Reports automatically through a common schema in Extensible Markup Language (XML).
The State Secretary of Finance provided a letter to Dutch parliament in which he indicated that an internet consultation has been opened for a draft bill on 10th July 2017. The draft bill has been formulating in order to implement the first EU Anti-Tax Avoidance Directive (ATAD 1) which was approved by the EU member states in June 2016, an EU directive that provides for a minimum harmonization against tax avoidance. The ATAD measures include an earning clear rule, exit taxation, Controlled Foreign Companies (CFC) rule and a general anti-abuse rule (GAAR). Consultation on these preliminary proposals will be open until 27 August 2017 and a final proposal for the further juridical procedure is expected during the first quarter of 2018. The effective date of the proposal is 1st January 2019.
Interest deduction rules: According to the draft bill, the (excessive) interest expenses are only deductible up until 30% of the corrected Dutch taxable profit, or tax available EBITDA. However, the non-deductible interest costs that exceed 30% of EBITDA is deductible up to a maximum amount of EUR 3 million. The proposal does not yet make a choice whether a worldwide group ratio escape rule will be implemented, and, if so, whether this will be an equity escape rule or an earnings-based worldwide group ratio rule.
CFC rules: The CFC rule targets taxpayers that directly or indirectly hold more than 50% of capital or voting rights or are entitled to receive more than 50% of the profits of low-taxed foreign entities and low-taxed PEs. The ATAD provides two different options for EU Member States to include CFC rules (model A and model B). Based on Model A, passive income (e.g. interest, royalties and dividend income) of a CFC will be included as current income in the taxable base of a domestic company, unless the CFC is involved in substantial economic activities. Based on model B the income of a CFC will only be included in the taxable income of the Dutch parent company in case of artificial allocation of profits to a CFC.
The GAAR will not be executed separately, based on the view that the abuse of law-doctrine as developed in Dutch case law achieves the same goal.
The Government of the Netherlands has announced that an agreement with Indonesia has been concluded regarding the taxation of investment funds. The agreement clarifies the application of the Dutch-Indonesian double tax avoidance agreement to investors in acknowledged investment fund structures. On 11th July the Dutch Ministry of Finance announced that a new competent authority agreement was signed by the two sides on 23rd June 2017. The Netherlands has similar treaties with Canada, Denmark, Germany, Norway, Switzerland and the United Kingdom.
The amending protocol of Double Taxation Agreement (DTA) between Indonesia and Netherlands will enter into force on 1 August 2017 and as of 1 October 2017, this protocol will apply.
A pending protocol to tax treaty between the Netherlands and Indonesia of 29 January 2002 has been signed on 30 July 2015, will enter into force on 1 August 2017. This Protocol was published on 10 August 2015. The protocol applies for amounts paid or credited on or after 1 October 2017.
The Netherlands signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) on 7th June 2017. About 70 Ministers and other high-level representatives participated in the signing ceremony at Paris. Eight other countries and jurisdictions have expressed their intention to sign the MLI and more countries are expected to sign by the end of this year.
The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6. The MLI provisions will generally take effect concerning to withholding taxes on the 1st day of the calendar year following the last date on which the MLI enters into force for each of the two Contracting Jurisdictions and six months as of this date with respect to all other covered taxes.