Menu
  • Locations
  • About Us
  • Services
  • Experts
  • News
  • Knowledge
  • Culture & Career
  • Locations
  • Search
  • Press
  • Events & Webinars
  • Contact
  • Albania
  • Angola
  • Argentina
  • Armenia
  • Australia
  • Austria
  • Bangladesh
  • Belarus
  • Belgium
  • Benin
  • Bolivia
  • Bosnia & Herzegovina
  • Brazil
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Chile
  • China
  • Colombia
  • Costa Rica
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Guatemala
  • Guinea
  • Honduras
  • Hong Kong
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iran
  • Iraq
  • Ireland
  • Israel
  • Italy
  • Ivory Coast
  • Japan
  • Kazakhstan
  • Kenya
  • Korea
  • Kyrgyzstan
  • Laos
  • Latvia
  • Lithuania
  • Luxembourg
  • Macao
  • Macedonia
  • Madagascar
  • Malaysia
  • Mali
  • Malta
  • Mauritius
  • Mexico
  • Moldova
  • Mongolia
  • Montenegro
  • Morocco
  • Mozambique
  • Myanmar
  • Nepal
  • Netherlands
  • New Zealand
  • Niger
  • Nigeria
  • Norway
  • Pakistan
  • Panama
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Romania
  • Russia
  • Rwanda
  • Saudi Arabia
  • Senegal
  • Serbia
  • Seychelles
  • Singapore
  • Slovakia
  • Slovenia
  • South Africa
  • Spain
  • Sri Lanka
  • Sweden
  • Switzerland
  • Taiwan
  • Tanzania
  • Thailand
  • Togo
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • Uruguay
  • USA
  • Uzbekistan
  • Venezuela
  • Vietnam
  • Zambia
  • About Us
  • Our CEO
  • Our Board
  • Our Global Executive Team
  • Quality, Process & Risk Management
  • Corporate Tax
  • Customs
  • Financial Services
  • Global Mobility
  • Indirect Tax
  • International Corporate Tax
  • Mergers & Acquisitions (M&A)
  • Private Clients & Family Office
  • Sustainability & ESG in Taxation
  • Tax Controversy
  • Tax Technology
  • Transfer Pricing & Valuation
  • Real Estate
  • Latest News
  • Pillar Two - Global Minimum Tax
  • Brochures
  • Newsletters
  • Newsletter Subscription
  • Surveys & Studies
  • The Digital Tax Law Center (DTLC)
  • The European Tax Law Center (ETLC)
  • Climate Protection, Green Tax & Energy
  • Sustainability & ESG in Taxation
  • Tax Loss Carryback
  • Real Estate Guide
  • Tax and Investment Facts CEE
  • Assignments to Europe & Asia Pacific
  • Assignments to the Americas
  • Culture and Leadership
  • Diversity
  • WTS Global Academy
  • Career
  • Your Development
  • Jobs
  • Pillar Two Team
  • Press
  • Events & Webinars
  • Contact
WTS worldwide
  • Albania
  • Angola
  • Argentina
  • Armenia
  • Australia
  • Austria
  • Bangladesh
  • Belarus
  • Belgium
  • Benin
  • Bolivia
  • Bosnia & Herzegovina
  • Brazil
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Chile
  • China
  • Colombia
  • Costa Rica
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Guatemala
  • Guinea
  • Honduras
  • Hong Kong
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iran
  • Iraq
  • Ireland
  • Israel
  • Italy
  • Ivory Coast
  • Japan
  • Kazakhstan
  • Kenya
  • Korea
  • Kyrgyzstan
  • Laos
  • Latvia
  • Lithuania
  • Luxembourg
  • Macao
  • Macedonia
  • Madagascar
  • Malaysia
  • Mali
  • Malta
  • Mauritius
  • Mexico
  • Moldova
  • Mongolia
  • Montenegro
  • Morocco
  • Mozambique
  • Myanmar
  • Nepal
  • Netherlands
  • New Zealand
  • Niger
  • Nigeria
  • Norway
  • Pakistan
  • Panama
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Romania
  • Russia
  • Rwanda
  • Saudi Arabia
  • Senegal
  • Serbia
  • Singapore
  • Slovakia
  • Slovenia
  • South Africa
  • Spain
  • Sri Lanka
  • Sweden
  • Switzerland
  • Taiwan
  • Tanzania
  • Thailand
  • Togo
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • Uruguay
  • USA
  • Uzbekistan
  • Venezuela
  • Vietnam
  • Zambia
  • About Us
    About Us

    Here you will find more information on our organization’s structure, experts and global reach.

    Read more
    About Us Our CEO Our Board Our Global Executive Team Quality, Process & Risk Management
  • Services
    Services
    Read more
    Corporate Tax Customs Financial Services Global Mobility Indirect Tax
    International Corporate Tax Mergers & Acquisitions (M&A) Private Clients & Family Office Sustainability & ESG in Taxation Tax Controversy
    Tax Technology Transfer Pricing & Valuation Real Estate
  • Experts
    Experts

    With a representation in over 100 countries, our team offers local expertise on a global scale. Learn more about our experts.

    Read more
  • News
    News

    Find here the latest news 

    Read more
    Latest News
  • Knowledge
    Knowledge
    Read more
    Pillar Two - Global Minimum Tax Brochures Newsletters Newsletter Subscription Surveys & Studies
    The Digital Tax Law Center (DTLC) The European Tax Law Center (ETLC) Climate Protection, Green Tax & Energy Sustainability & ESG in Taxation Tax Loss Carryback
    Real Estate Guide Tax and Investment Facts CEE Assignments to Europe & Asia Pacific Assignments to the Americas
  • Culture & Career
    Culture & Career

    The WTS Global Academy - Bringing value to the whole

    Read more
    Culture and Leadership Diversity WTS Global Academy Career Your Development
    Jobs
  • Locations
    Locations
    Read more
  • Search
26.07.2021

Netherlands: Proposed limitation to Dutch unilateral downward adjustments

Author
Taco Wiertsema
Counsel
Transfer Pricing & Tax Controversy
Netherlands, Atlas Tax Lawyers
View Profile

In March 2021, the Dutch Ministry of Finance published an internet consultation on a draft proposal to amend the Dutch codification of the arm’s-length principle, the (“Draft Bill”). The Draft Bill, which is intended to enter into force on 01 January 2022, will limit unilateral downward transfer pricing adjustments of the Dutch taxpayer to the extent that the corresponding upward adjustment is not included in the taxable base of the (foreign) related entity. Under the current rules, unilateral downward adjustments of the profit of a Dutch taxpayer do not need to be mirrored by a corresponding adjustment at the level of the counterparty.

Takeaways

Considering the absence of grandfathering rules, Dutch taxpayers are well advised to review the potential (retro-active) impact of the Draft Bill on existing rulings and/or APAs. In addition, where contractual terms are applied that deviate from the arm’s-length principle, Dutch taxpayers will need to closely follow the legislative process of this Draft Bill.

The Draft Bill

The Draft Bill proposes to only allow downward adjustments to the extent that a corresponding adjustment is included in the taxable basis in the other jurisdiction. This implies that, for instance, deemed deductions that are not (entirely) picked up elsewhere would no longer be (fully) taken into account for Dutch tax purposes. The Draft Bill also applies to situations where the jurisdiction of the other related entity does not levy corporate income tax. However, deemed deductions are not limited where the corresponding income is not effectively taxed as a result of loss compensation rules or where the income is taxed at a rate of 0%.

The Draft Bill will also limit the tax amortisation of assets for which a step-up in basis to the (higher) fair market value was claimed. Like deemed deductions, this rule will kick in to the extent that the fair market value of such assets is not included in the taxable basis in the jurisdiction of the seller. This would have the effect that taxpayers can no longer claim a (full) tax-deductible amortisation on the fair market value of such assets. The proposed measures also limit the tax depreciation of such assets acquired in the five years prior to FY 2022 (i.e. the tax amortisation limitation will effectively have retro-active effect until FY 2017).

Rebuttal rule

When applying a one-sided transfer pricing method, e.g. the TNMM, the arm’s-length profit of a Dutch group company is determined based on an analysis of its functions, risks and assets. The (subsequent) price setting of the (various) intercompany transactions engaged in by the Dutch company is in fact a result of that arm’s-length profit. If tax authorities were to correct upwards the arm’s-length price of one of the intercompany transactions (i.e. representing additional taxable income for the Dutch company), whereas its arm’s-length profit is not challenged, based on the “total profit concept” the Dutch company can currently claim a corresponding downward adjustment (i.e. a correction on the cost side). On balance, the Dutch company would continue to report its arm’s-length profit (i.e. although based on higher income and cost).

However, under the Draft Bill, the corresponding downward adjustment cannot be claimed, as it cannot be argued that this adjustment is included in the tax base ‘elsewhere’. In addition to that, it is noted that the correction and the corresponding downward adjustment will often only be made multiple years after the end of the relevant FY. Often the “other related entity” will already have filed a tax return for the FY in question. In its current form, the Draft Bill will also be triggered in situations which are clearly not aimed at abusing mismatch situations.

Various commentators to the internet consultation have indicated that, if indeed enacted, Article 8ba of the Dutch Corporate Income Tax Act will need to include a rebuttal rule. Under such rule, Dutch taxpayers will need to have the possibility to argue that Article 8ba Dutch Corporate Income Tax Act does not apply in certain situations because, for example, given the mismatch situation it was not intended, or where the taxpayer’s remuneration continues to be at arm’s-length.1

 

1 In the Hornbach-Baumarkt case dated 31 May 2018, ECLI:EU:C:2018:366., the Court of Appeal of the EU conforms that, in case of alleged non-arms’-length conduct, a taxpayer will need to have the possibility to apply a rebuttal rule.

Read the WTS Global Transfer Pricing Newsletter here.

Author
Taco Wiertsema
Counsel
Transfer Pricing & Tax Controversy
Netherlands, Atlas Tax Lawyers
View Profile
Article published in Transfer Pricing Newsletter #2/2021
Transfer Pricing Newsletter: Update on the recent news and cases in 16 countries
View publication
Newsletter Transfer Pricing

With this newsletter, we inform multinational companies on country-specific and international legislative documents and regulations.

Subscribe now
Articles you might be interested in

The finance ministers of the Group of Seven (G7) have agreed on a historic global tax deal on 5 June 2021. Read more in the latest newsflash by Atlas Tax Lawyers.

The G7 Finance Ministers Agree Historic Global Tax Agreement
Read more

Our colleague Denis Pouw provides insight on the most interesting developments of 2020 regarding the Dutch "dividend tax" on portfolio dividends received from foreign investment funds.

Netherlands: Developments regarding WHT on portfolio dividends
Read more

Dutch authorities concluded an agreement with the Belgian and German authorities to mitigate the tax and social security
impact from working from home.

Netherlands: Working from home due to the coronavirus: the Dutch tax impact
Read more

Get in contact

If you have any questions about WTS Global or our global services, please get in touch.
We will respond to you as soon as possible.

Contact
About Us
  • About Us
  • Our CEO
  • Our Board
  • Our Global Executive Team
  • Quality, Process & Risk Management
Services
  • Corporate Tax
  • Customs
  • Financial Services
  • Global Mobility
  • Indirect Tax
  • International Corporate Tax
  • Mergers & Acquisitions (M&A)
  • Private Clients & Family Office
  • Sustainability & ESG in Taxation
  • Tax Controversy
  • Tax Technology
  • Transfer Pricing & Valuation
News
Knowledge
  • Pillar Two - Global Minimum Tax
  • Brochures
  • Newsletters
  • Surveys & Studies
  • The Digital Tax Law Center (DTLC)
  • VAT Update for the Digital Economy
  • The European Tax Law Center (ETLC)
  • Tax Loss Carryback
  • Real Estate Guide
Culture & Career
  • Culture and Leadership
  • Diversity
  • WTS Global Academy
  • Career
  • Your Development
  • Jobs
Exclusive Cooperation With
© 2023 WTS Company Information Data Protection Disclaimer