Changes in the Netherlands: Ruling Policy Released

Why are the Netherlands so attractive from an international tax planning point of view?

The Netherlands are a high-tech country and the Dutch economy is performing well. The Netherlands have fantastic geographical advantages, being close to London, Paris, Brussels and Frankfurt.

On March 30 2001, in reaction to pressure of other EU member states, the Netherlands Ministry of Finance released eight decisions establishing a new ruling policy. These policy decisions mainly intend to: 

  1. Assure that Netherlands transfer pricing rulings comply with the OECD transfer pricing guidelines. This policy decision introduces ‘Advance Pricing Agreements’ or ‘APAs’. These are unilateral, bilateral, and multilateral rulings on transfer pricing of cross border transactions (goods and services). The contents of the rulings will be based on the OECD transfer pricing guidelines.
  2. Avoid that – companies with little or no Netherlands substance and/or incurring little or no risk – obtain financing and royalty rulings. Here the concept of an Advance Tax Ruling (‘ATR’) is introduced, which could provide a request for advance certainty.
  3. Avoid the issuance of ruling that might violate the principle of good faith governing relationships between treaty partners. In most cases, the policy decisions will not affect rulings to be issued to Netherlands holding companies.

The Netherlands Ministry of Finance announces that any ruling application may be denied, if, judged by Netherlands principles, the transaction for which a ruling is sought can be characterized as challenging the limitation of the (foreign) laws or a tax treaty. It is the view of the Ministry of Finance that granting a ruling in such circumstances violates the principle of good faith governing a ruling in such cases if he can show that the relevant treaty countries are aware of the transaction for which a ruling is sought.


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