I reckon I have been lucky that a significant part of my work has related to Dutch tax matters. This means that I was often dealing with the capable and qualified Dutch tax inspectors. It also means that I have been dealing with the approachable Dutch tax authorities. This approachability is one of the things that makes the Dutch business environment so attractive. Once one is seriously considering a certain structure or transaction, he or she can contact the Dutch tax authorities and discuss the potential Dutch tax consequences of the intended structure/transaction. If the taxpayer and the Dutch tax authorities agree upon the tax consequences of the intended structure, taxpayer and tax authorities can conclude an Advance Tax Ruling (ATR). By doing so the taxpayer obtains upfront certainty regarding the Dutch tax consequences of an intended structure/transaction and avoids uncertainty and potentially lengthy legal procedures. Next to the possibility to obtain an ATR, under conditions it is also possible to conclude an Advance Pricing Agreement (APA) and by doing so avoid uncertainty regarding intercompany prices to be charged/paid for certain services or products.

 

Lately however, together with the Belgian, Irish and Luxembourg ruling practices, the Dutch ruling practice has become the center of attention. If one listens to the rhetoric of some foreign politicians, and even worse of some Dutch left wing politicians, one might get the idea that the Dutch ruling practice is a tax Valhalla in which everything is possible, almost no rules apply and in which it is possible to wheel and deal with the Dutch tax authorities as one likes. But is this true? Or is this just a myth that these politicians have created to get their political agendas implemented?

 

As stated above the Dutch tax authorities are willing to discuss the Dutch tax consequences of a certain structure or transaction before the structure/transaction is implemented. However certainly since 2004, strict rules apply regarding the possibilities to obtain an ATR or APA. First of all the taxpayer has to provide the Dutch tax authorities with a.o. a detailed description of all relevant facts of the intended structure/transaction. Furthermore the taxpayer will have to provide the tax authorities with an analysis why based on the Law, other regulations and Jurisprudence the structure or transactions should have certain Dutch tax consequences. If based on the detailed description of all relevant facts of the intended structure/transaction the Dutch tax authorities agree on the analysis of the Dutch tax consequences as made by the taxpayer, it will be possible to obtain an ATR. If the Dutch tax authorities do not agree (and interpret the Law, regulations or jurisprudence differently) they will not sign of on the ATR.

 

To obtain an APA the taxpayer has to provide the tax authorities a.o. with information regarding the transactions, products, businesses or agreements for which the request is filed and also a description of the proposed transfer pricing method including an analysis of comparables.

 

Furthermore an ATR/APA is normally only concluded for a ‘reasonable’ period after which a revaluation will have to take place. Furthermore an ATR contains a paragraph stating that the ATR does no longer apply from the moment law changes enter into force (and a potential transitional period has expired) or from the moment the facts and circumstances which are deemed critical for the ATR do no longer apply. The aforementioned also applies to an APA.

 

This above is the theory. What do the numbers say?

 

Is there other (more objective) information available that might support either that the Dutch ruling practice is indeed a Valhalla for taxpayers, or that supports the opposite; namely that this idea that the Dutch ruling practice is a Valhalla for taxpayer is nothing more than a myth?

 

We seem to live in an age in which numbers are considered to be the most important. Therefore the numbers regarding the Dutch ATR and APA practice that the Dutch State Secretary for Finances sent to the Dutch parliament on February 2, 2015 might be helpful. The Dutch State Secretary for Finances provided the Dutch Parliament with the following numbers:

 

ATRs

 

 

2010

2011

2012

2013

2014

Applications made

-

-

-

-

-

Applications turned down

76

81

53

69

55

Applications withdrawn

51

28

36

42

41

ATRs agreed during the year

355

408

468

441

429

 

APAs

 

2010

2011

2012

2013

2014

Applications made

-

-

-

-

-

Applications turned down

41

41

47

49

39

Applications withdrawn

26

30

27

23

22

APAs agreed during the year

205

248

247

228

203

Unfortunately the Dutch Secretary of State did not publish the number of applications filed in each of the years.

In my view these numbers provide some additional insight in the Dutch ruling practice. The total numbers of ATRs and APAs granted during the years 2010 - 2014 seem significant.

 

To answer the question I raised in the beginning of this column in my view the number of applications turned down is more important than the number of ATRs/APAs agreed. Based on the information provided by the Dutch Secretary of State, the total number of ATRs agreed during the years 2010 - 2014 amounts to: 2,101. At the same time the total number of applications turned down during these years amounts to: 334 (or 15.9% of the number of rulings granted). With respect to APAs the numbers do not differ a lot. Where a total of 1,131 APAs was agreed, 217 applications have been turned down (almost 19.2% of the number of APAs agreed).

 

Now I am the first to agree that the numbers in itself might not tell the whole story. It however seems safe to assume that a majority of ATR/APA requests is filed by tax specialists. Specialists that (should) know they will not be able to obtain an ATR or APA if they do not have a solid case which is supported by applicable Law, other regulations or jurisprudence. If you take this into account, the numbers might say more then some politicians or people with a political agenda want to admit. If one only looks at the total number of APAs and ATRs agreed upon by the Dutch tax authorities, one might get the feeling that the Dutch ruling practice is a Valhalla for taxpayers. However, the number/percentage of APAs and ATRs turned down seem to tell an other story. In my view the number/percentage of ATR and APA requests turned down busts the myth that the Dutch ruling practice is a Valhalla for taxpayers.

 

However the last word on the matter is not to me, but to the European Commission and the European Parliament’s Special Committee on Tax Rulings.

 

 

For previous columns click here.

 

Copyright – internationaltaxplaza.info

 

Stay informed: Subscribe to International Tax Plaza’s Newsletter!

 

 

Submit to FacebookSubmit to Google PlusSubmit to StumbleuponSubmit to TwitterSubmit to LinkedIn
INTERESTING ARTICLES