New Anti-Evasion Measures
The Government of the Netherlands has announced a comprehensive package of tax anti-avoidance proposals designed to bring the jurisdiction's rules into line with new European Union anti-avoidance laws and fulfill its obligations under the international BEPS agenda.
The plans were detailed in a parliamentary paper sent by State Secretary for Finance Menno Snel on February 23, and include legislative proposals that the Government intends to introduce over the next two years to combat cross-border tax avoidance, as well as other aspirations in this direction. The main proposals are summarized below:
- The European Anti-Avoidance Directive (ATAD 1) will be introduced in 2019, with the Netherlands going beyond the minimum requirements stipulated in the directive. Legislation will be introduced in the first half of 2018 containing a general interest deduction limitation rule, a new controlled foreign company regime, new exit tax rules, and a general anti-abuse rule.
- The second EU Anti-Avoidance Directive (ATAD 2) will be implemented in 2020 to tackle hybrid mismatch arrangements. An online consultation on these measures, described as "technically very complex," will commence in 2018, and it is expected that ATAD 2 legislation will be introduced in parliament in 2019.
- A new system of withholding taxes will be imposed on outgoing dividend, interest, and royalty payments to discourage the "abusive" shifting of income to low-tax jurisdictions. This measure may also require the Government to negotiate changes to some of the Netherlands' tax treaties.
- Substance requirements needed for taxpayers to claim the benefits of Dutch tax treaties will be tightened to tackle so-called "letterbox companies." As a result, companies will be required to have a total wage bill of at least EUR100,000 (USD123,000) and have office space available for at least 24 months to qualify for tax treaty benefits. The Netherlands will also exchange information more frequently with source countries to help enforce these rules.
- Transfer pricing rules will be amended in line with OECD guidance. In particular, the Government wants to adopt the new methodology used to determine the allocation of risk and function in a multinational group. The plan also mentions how the guidelines pay closer attention to the attribution of profits related to intangible assets.
- To combat the use of aggressive cross-border tax avoidance schemes, legal liability of tax advisors would be reinforced, legislation governing trust offices strengthened, and penalties for non-compliance would be published.
- To increase transparency of company ownership, a register of ultimate beneficial owners will be introduced, in line with the EU Fourth Anti-Money Laundering Directive.
- As set out in its letter to parliament on February 18, 2018, the Government also intends to introduce new processes and substance requirements regarding cross-border advanced tax rulings, including advanced pricing agreements. The Government will seek advice from an independent panel of experts and stage a public consultation on these proposals, before introducing new rules in January 2019.
According to the plan, the Netherlands also supports EU proposals for the disclosure by tax advisers of aggressive tax avoidance schemes, and for the public disclosure of country-by-country reports.
However, while the plan discusses the issue of corporate tax competition, particularly in the context of the recent tax reforms in the United States, and says that countries should work together to eliminate harmful tax regimes, it nevertheless argues that countries should remain free to set their own rates of corporate tax. As such, the Government is opposed to the idea of a minimum corporate tax rate at EU level, as well as the harmonization of the EU corporate tax base under the proposed EU common consolidated corporate tax base proposals.