(September 16, 2015)

On September 15, 2015 it was Budget Day in the Netherlands. On this day also several law proposals were published. In this article we will focus on the proposed amendments with respect to the implementation of the country-by-country reporting obligation and the proposed amendments with respect to the implementation of the amended Parent-Subsidiary Directive.

 

Implementation of Country-by-Country reporting

 

The Netherlands has chosen to amend the Dutch corporate income tax to implement the country-by-country-reporting obligation. The amendments proposed/provisions to be inserted in the Dutch corporate income tax Act as included in the Wetsvoorstel Overige Fiscale Maatregelen 2016 largely follow the Model legislation that was included in the document “Action 13: Country-by-Country Reporting Implementation Package” that the OECD released in June 2015.

 

Based on the proposal the provisions regarding country-by-country reporting apply to taxpayers that are members of a multinational group which realized a turnover of at least Euro 750 million in the fiscal reportable year preceding the fiscal reportable year to which the country-by-country report would apply (proposed Article 29c, paragraph 5).

 

The county-by-country report has to be filed no later than 12 months after the last day of the Reporting Fiscal Year (proposed Article 29c, paragraph 2).

 

The law proposal states that a country-by-country report should be in either the Dutch or the English language.

 

Furthermore it is proposed that a group entity that is subjected to Dutch corporate income tax and  that is part of a multinational group which realized a turnover of at least Euro 50 million of consolidated group revenues in the fiscal year preceding the fiscal year to which the Dutch corporate income tax return applies, has to prepare a master file and a local file (proposed Article 29g).

 

Both the master file and the local file have to be prepared in either the Dutch or the English language (proposed Article 29g, Paragraph 1).

 

Both the master file and the local file have to be available at the date that the Dutch corporate income tax return has to be filed (proposed Article 29g, Paragraph 1).

 

The master file a.o. has to provide information regarding the business of the multinational group, including the nature of its activities, its transfer pricing policy and the worldwide allocation of its income and economic activities (proposed Article 29g, Paragraph 2).

 

The local file a.o. has to provide information that is relevant for analyzing the transfer prices with respect to transactions with related entities that the taxpayer entered, as well as information that supports the allocation of profits to permanent establishments (proposed Article 29g, Paragraph 23).

 

It is the intention of the Dutch Government to have the new reporting obligations to apply to financial years starting on or after January 1, 2016.

 

Click here to be forwarded to the Wetsvoorstel Overige Fiscale Maatregelen 2016.

 

Click here to be forwarded to the document “Action 13: Country-by-Country Reporting Implementation Package” that the OECD released in June 2015.

 

Implementation of the amended Parent-Subsidiary Directive

 

The proposed amendments in the law proposal “Wet implementatie wijzigingen Moeder-dochterrichtlijn 2015” can be divided in two sets of amendments. The first set of amendments are amendments to the Dutch corporate income tax Act. The second set of amendments are amendments to the Dutch dividend withholding tax Act.

 

Proposed amendments to the Dutch corporate income tax Act

 

Article 13: Participation exemption

 

Under the proposal the Dutch participation exemption will no longer apply to remunerations or payments by the subsidiary for as far as at the level of the subsidiary these remunerations/payments can be deducted from the base of a tax on profits.

 

The application of the aforementioned is also extended to what is received for the loss of such remuneration or payment. Furthermore the application is also extended to cases in which such a remuneration or payment is credited from historical cost price of the subsidiary.

 

Article 13aa: Beleggingsdeelneming (Investment subsidiary)

 

Similar provisions as described above will be added to Paragraph 7 of Article 13aa.

 

Aticle 17: Non-resident taxpayers

 

Furthermore it is proposed to amend Article 17, Paragraph 3, sub b of the Dutch corporate income tax Act. (Article 17 of the Dutch corporate income tax Act contains regulations regarding the tax base over which non-resident entities are taxed for Dutch corporate income tax purposes) The current Article 17, Paragraph 3, sub b of the Dutch corporate income tax Act already contains an anti-abuse provision. Under the current regulations a foreign entity that has a shareholding of at least 5% in a Dutch entity is taxed over the income realized through this shareholding if:

1.     the main purpose, or one of the main purposes, for holding this shareholding is to avoid the levying of income tax or dividend withholding tax at the level of another individual or entity (the main purpose test); and

2.     the shareholding is not held in line with the business activities of the shareholder (the business test)

 

Although the wording of the text has changed a little it looks like that under the proposed amendments the main purpose test will stay. Under the proposed amendments the business test however is replaced by an artificial construction test. In this respect a construction is considered artificial if it was not implemented based on sound business reasons that reflect the economic reality.

 

Article 28c: Compartimenteringsreserve

 

Also it is proposed to add a new Paragraph to Article 28c of the Dutch corporate income tax Act. Article 28c contains provisions regarding a so-called “compartimenteringsreserve”. Based on the proposed paragraph, the existing provisions of Article 28c do not apply in case the Dutch participation exemption does not apply to income derived via a subsidiary because of the applicability of the anti-abuse clause of the newly to be added Article 13, Paragraph 17 of the Dutch corporate income tax Act.

 

Proposed amendments to the Dutch dividend withholding tax Act

 

Furthermore the law proposal proposes to amend the anti-abuse clause of Article 1, Paragraph 7 of the Dutch dividend withholding tax Act. This anti-abuse clause sees on structures involving a Coop.

 

Click here to be forwarded to the law proposal “Wet implementatie wijzigingen Moeder-dochterrichtlijn 2015”.

 

 

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