Generally, the tax year is equal to the calendar year. However, corporate taxpayers may deviate from this by adopting a different financial year.
Corporate taxpayers are required to file a tax return annually. The due date is generally five months after the end of the company’s financial year. This filing due date may be extended upon request by the taxpayer.
The Dutch tax authorities generally make a provisional assessment before issuing the final assessment. The final assessment must be issued within three years following the financial year. This period is prolonged with the time of the extension for filing the tax return. The Dutch tax authorities may issue an additional assessment if it appears that the amount of CIT payable (as calculated in the final assessment) is too low.
During the current tax year, a provisional assessment can be issued on the basis of prior years’ taxable income or on an estimation provided by the taxpayer.
Functional foreign currency regime
As a main rule, the CIT return should be filed in euros. Under certain conditions, the CITA, however, allows the corporate taxpayer to file its tax return in a currency other than euros. The main conditions are as follows:
- A request must be submitted with the tax inspector prior to the year as of which the regime is requested. The decision made by the tax inspector on the request is open to appeal.
- If the request is granted, the functional foreign currency applies for at least ten years.
- The foreign currency to be applied for tax purposes is also applied in the commercial accounts of the taxpayer, which currency is justified by the business conducted by the taxpayer or the international position of the group the taxpayer is part of.
- The foreign currency to be applied is one of the currencies for which a ‘euro foreign exchange rate’ is published by the European Central Bank (ECB).
- A fiscal unity for Dutch CIT purposes is eligible for the functional foreign currency regime, provided that all of the companies that are part of the fiscal unity have obtained permission to apply that regime.
Under the functional currency regime, the taxable amount is annually translated from functional currency into euros against the average of the exchange rate during the financial year (as published by the ECB). Any translation results of the foreign currency to euros are no longer recognised under this regime for Dutch tax purposes.
Payment of tax
The CIT assessed must be paid within two months of the date of the provisional or final assessment. Interest is payable on the CIT due. The interest is calculated from six months following the financial year. The minimum interest rate is 8%.
Refund of tax unduly levied
If a corporate taxpayer is entitled to a refund of Dutch CIT or dividend WHT because the levy appeared to be in conflict with EU law, the Netherlands might be obligated to repay with interest for the period from the levy to the refund. The taxpayer must file a request at the Dutch tax authorities within six weeks after the refund.
Interest on late payment dividend WHT
Interest is calculated on late payments or refunds of Dutch dividend WHT.
Tax audit process
Corporate taxpayers might be subject to audits by tax inspectors. This forms part of the so-called vertical monitoring tasks of the national tax authorities. In recent years, there has been a tendency towards a more enhanced cooperation between tax authorities and taxpayers in the Netherlands (see Horizontal monitoring below).
Statute of limitations
Under certain conditions, the tax administration can impose an additional assessment within five years from the year in which the tax debt originated (if the filing due date was extended on request, this period is added). In case of income from abroad, the period for additional assessment is extended to 12 years.
Advance pricing agreement (APA)/Advance tax ruling (ATR)
Taxpayers are able to obtain (legal) certainty concerning their CIT positions. They may request the Dutch tax authorities to conclude an APA with respect to the transfer pricing of controlled transactions. Taxpayers may also request the Dutch tax authorities to provide an ATR with respect to the CIT implications of a (contemplated) set of transactions.
On 1 July 2019, a new ruling policy for rulings with an international character (APA/ATR) took effect. The most important new elements are:
- In certain situations, no more pre-consultation will be allowed for, namely when:
- there is no sufficient relevant economic nexus
- saving of Dutch or foreign tax is the sole or decisive reason for the transaction, or
- a transaction takes place with a country that is on the Dutch list of low-tax jurisdictions.
- Rulings are published in summarised and anonymous form. Situations in which pre-consultation has taken place but where the ruling has not been concluded are also published in summarised form, including an explanation of why the ruling was not concluded.
- In principle, the tax authorities will make an effort to conclude APAs bilaterally, provided that a tax treaty has been concluded with the other country and that country is willing to cooperate in this respect.
If the taxpayer is willing, the Dutch tax authorities, in certain cases, shift their method from vertical monitoring to horizontal monitoring.
The Dutch tax authorities will adjust the methods and intensity in which they perform their monitoring to the level of tax control of the taxpayer. As a result, audits performed by the tax authorities will shift from reactive (tax audits over past years) to proactive (providing ‘assurance’ upfront). Under horizontal monitoring, the company’s relationship with the Dutch tax authorities is based on mutual trust, understanding, and transparency. Horizontal monitoring can be applied to all taxes, including CIT, VAT, wage tax, and social security.
The main benefit of horizontal monitoring is that relevant tax risks and positions can be dealt with when they occur. The company is required to act with a transparent attitude towards the Dutch tax authorities, and they will, in return, provide a quicker response with respect to tax issues that are brought to their attention by the company. This proactive assurance prevents unpleasant surprises afterwards. Apart from this, it helps with accurately determining the tax cash flow, deferred and current taxes, and ascertains that the company has as little uncertain tax positions as possible. This saves the company both time and costs.
We do note that the tax authorities currently (November 2019) reformulated horizontal monitoring. Top 100 taxpayers in the Netherlands are no longer part of this programme and will get an individual approach and monitoring plan. Individual horizontal monitoring will be possible for companies who require an audit on their annual accountants and which have a tax strategy, a tax risk analysis, and a monitoring and testing plan in place. For small and medium enterprises, a general covenant is possible through their qualified service provider. PwC is one of the qualified service providers.
The Dutch Corporate Income Tax Act and Dividend Withholding Tax Act contain several anti-abuse provisions that aim to counter artificial arrangements. In these cases, the taxpayer can prove that the arrangement is not artificial if it meets certain relevant substance requirements. Before 2020, these substance requirements served as ‘safe harbour rules’. Yet, following the ECJ’s Danish beneficial ownership cases (see the ‘Significant developments section), as of 1 January 2020, these substance requirements no longer serve as safe harbour rules. The relevant substance requirements now serve as an indication that the arrangement is not artificial, leaving room for other facts and circumstances to play a role in determining whether or not there is abuse. There are similar regulations in the Conditional Source Taxation Act, which is to be introduced in 2021.
Topics of focus for tax authorities
The topics of focus for the Dutch tax authorities may vary.