Netherlands

Corporate - Other issues

Last reviewed - 01 July 2022

Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement (IGA) with the United States (US)

The Netherlands signed an FATCA IGA with the United States in 2013. Ever since, Dutch banks and insurers must be compliant with the FATCA provisions. This US-based legislation is implemented in Netherlands’ domestic law and applies to all financial institutions. The FATCA IGA is based on the standard Model 1A IGA of 4 November 2013 and provides for specific exemptions.

Common Reporting Standard (CRS)

The CRS is implemented in Netherland’s domestic law as of 1 January 2016. The same holds true for the amended EU Directive on Administrative Cooperation.

Based on this domestic law, financial service companies in the Netherlands must comply with certain administrative obligations and report information on foreign account holders to the Dutch tax authorities. This information may include account numbers and the balance on a bank account of foreign account holders.

Base erosion and profit shifting (BEPS)

According to the Netherlands, the BEPS issues should be addressed through international cooperation. As a member of the OECD, the Netherlands is an active participant in the BEPS project of the OECD and supports its goals. As a consequence, the Netherlands will enact legislation when agreement is reached within the OECD on the BEPS project and all parties agreed to implement. The tax treaty related outcomes of the BEPS project are considered part of the Netherlands’ tax treaty policy.

The Netherlands has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI) to implement the tax treaty related outcomes of BEPS. The Netherlands has brought nearly all of its bilateral tax treaties within the scope of the MLI.

EU state aid

The European Commission has been investigating for several years whether certain schemes/regimes, as well as individual tax rulings, between companies and local authorities are in breach of EU state aid rules. In some of these cases the European Commission has already issued final decisions concluding that these schemes and tax rulings constitute unlawful state aid. One of these final state aid decisions concerns a Dutch tax ruling. The Dutch government has appealed this decision with the General Court (i.e. the court of first instance within the European Union). In its judgement, the General Court annulled the decision of the European Commission because, in the Court’s view, the European Commission did not demonstrate the existence of an economic advantage within the meaning of EU state aid rules.

The European Commission has also investigated other Dutch tax rulings for which a final state aid decision is expected. In addition, the Dutch government has taken the position that the Dutch tax ruling practice, in general, does not allow for state aid, considering that Dutch tax rulings do not deviate from Dutch tax law as the goal of Dutch tax rulings is to obtain certainty in advance.

Mandatory disclosure (DAC6)

DAC6 requires tax advisers, intermediaries, and in some cases taxpayers to exchange information with the tax authorities on certain structures. The aim is to counter aggressive tax planning, although non-aggressive structures may be impacted as well, as long as there is some connection to the European Union. On 1 January 2021, the 30-day period for the reporting of new cross border arrangements under the DAC6 regime started. This means that as from 1 January 2021, so-called cross-border tax arrangements become reportable within 30 days after the arrangement is made available or ready for implementation or the first step of implementation has been made. Read more on Dutch DAC6 implementation here.

Debt-equity bias reduction allowance (DEBRA)

On 11 May 2022, the EC published an EU Directive proposal introducing a debt-equity bias reduction allowance (DEBRA) and a limitation of the tax deductibility of exceeding borrowing costs (the EU Directive). The EC announced the DEBRA in its Communication on Business Taxation for the 21st century on 18 May 2021. The limitation of the tax deductibility of exceeding borrowing costs was not included in the Communication but was considered as an option during the consultation period. The proposed rules apply to taxpayers that are subject to corporate income tax in one or more EU Member States, including permanent establishments of non-EU head offices. The proposed rules do not apply to financial undertakings (as exclusively defined in the Directive). 

In short, the EC proposed that an allowance on equity shall be deductible, for 10 consecutive tax periods, from the taxable base of a corporate taxpayer capped at 30% of the taxpayer's earnings before interest, tax, depreciation and amortisation (EBITDA). In addition, the EC proposed that exceeding borrowing costs are deductible up to 85%. Thus, regarding exceeding borrowing costs of for instance an amount of 100 EUR, only 85 EUR are prima facie deductible.

To be adopted, the EU Directive requires unanimity from all EU27. If adopted, EU Member States, including the Netherlands, shall implement the provisions of the EU Directive by 31 December 2023 and apply them as per 1 January 2024.