When doing business internationally, there is always a level of legal uncertainty. You might have questions about your intra-group transactions and how to divide your margins among the global offices (transfer pricing), or you might even want to discuss if you meet the substance requirements or can apply a tax incentive such as the participation exemption.
Although Dutch tax advisors can assist you in such matters, you also might feel more comfortable if you obtain prior approval from the Tax & Customs Administration. Because in the end, Dutch tax advisors can’t predict the outcome of any situation. And certainly, you want to know how much taxes your Dutch company has to pay in the Netherlands.
The Dutch Tax & Customs Administration allows the option for prior consultations to nationally and internationally in order to obtain certainty in advance on the application of tax laws and regulations.
Such consultations can result in so-called ‘rulings’.
But it’s also possible to request for a VSO (vaststellingsovereenkomst), which applies to a more objective situation than a ‘ruling’ (and is therefore typically not used in an international context).
In several situations (VSO or tax ruling), a ‘kenniscentrum’ (a certain Tax Commission) will be involved, which will make the process slower and more bureaucratic. Consulting tax authorities is advised, and in some cases, the tax inspector might be able to issue the VSO, without the involvement of a Tax Commission.
How does a ‘vaststellingsovereenkomst’ work ?
A ‘vaststellingsovereenkomst’ (agreement between the Tax & Customs Administration and a Dutch business) often involves factual matters, such as the value of the real estate (or other assets), the depreciation period (based on expected lifespan) or the amount a director should receive as salary. The VSO could also include matters or situations which will take place in the future.
What is a ruling?
A ruling is an agreement between a taxpayer and the Tax and Customs Administration in which it is laid down how tax laws and regulations are applied in a specific situation. This is done through preliminary consultation. The tax consequences of, for example, a proposed investment are discussed here. For example, before a declaration is submitted, it becomes clear what the tax consequences are—both for the taxpayer and tax authorities. All taxpayers, both citizens and companies, can make use of this option.
This often concerns certainty in advance on the levy of corporation tax in the form of:
- Advance Pricing Agreements (APAs), and
- Advance Tax Rulings (ATRs)
Advance Pricing Agreements (Transfer Pricing)
An APA is typically agreed upon on the basis of the OECD transfer pricing guidelines and related to cross-border transactions (goods and services).
Every internationally-operating businesses can be affected by the so-called transfer pricing regulations, and therefore, it will have to allocate the margins to the different companies which are part of the intra-supply chain. Bolder Launch can inform you about the transfer pricing regulations in The Netherlands and advise you on the margins that you should allocate to your Dutch business. If desired, we can assist to obtain a Ruling or request a prior consulting in The Netherlands.
Advance Tax Rulings
An Advance Tax Ruling in the Netherlands (ATR) offers a taxpayer legal certainty on the tax implications of a planned transaction or combination of transactions, usually in an international context. It basically involves a VSO, but due to its international nature (or complexity), the legal standpoint of the Tax & Customs Administration will be presented in a ruling.
The rules for issuing an international ruling have been tightened. What has changed?
As of July 1, 2019, the rules for issuing international rulings have been changed on 3 points.
- From now on, the purpose of the request for the ruling will be examined more closely. The tax authorities only issue rulings to taxpayers who have an economic connection with the Netherlands. This also means that the company must really have a presence in the Netherlands and must have real activities with added value for the Dutch economy. For example, it must be clear whether there are enough people working in relation to the activities of the company. The Tax and Customs Administration no longer issues a ruling if the decisive goal or one of the goals of the applicant is to save Dutch or foreign tax. Also, no rulings are issued if there are transactions with countries that are on the Dutch list of low-taxing countries, or that are blacklisted by the European Union. Low-tax countries are countries with a tax rate of less than 9%.
- International rulings are checked twice. The second check is now carried out by the College of International Fiscal Security. This Board also ensures that issued rulings are, in principle, valid for a maximum of 5 years.
- The ruling practice is also becoming more transparent. A summary will be published on the website of the tax authorities as soon as possible after the ruling has been assessed. In addition, company-specific information is made anonymous. In this way, everyone can gain insight into the agreements that the Tax and Customs Administration makes with companies. In addition, a public annual report is published.
Is information about rulings shared with other countries?
Yes. In an OECD context, the information exchange on rulings has taken place since 1 April 2016; in an EU context since 1 January 2017. In both cases, the ruling itself is not initially exchanged, but the most important information about the ruling is based on a fixed template. Secondly, a country can request additional information, including the ruling itself, upon request.
Are you planning to start a business in The Netherlands, but are you coping with tax matters? Our Dutch tax advisors can assist you to make the right decisions! Contact our team for a free consultation.