Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

The Netherlands

The Netherlands has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) except identifying and exchanging information on all taxpayers benefitting from the third category of assets in the IP regime if they have not requested a ruling. (ToR I.4.1.3). The Netherlands has addressed all three of the recommendations that were made in the prior year peer review report with regard to the completion of the information gathering process on past rulings, the swift exchange of information on past and future rulings and the swift exchange of information on new entrants of the grandfathered IP regime and these recommendations are removed. The Netherlands is recommended to continue its efforts to identify and exchange information on taxpayers benefitting from the third category of IP assets as soon as possible.

The Netherlands can legally issue four types of rulings within the scope of the transparency framework.

In practice, the Netherlands has issued 2 198 past rulings; for the period 1 April 2016 – 31 December 2016, the Netherlands issued 297 future rulings; and for the year in review, the Netherlands issued 213 future rulings within the scope of the transparency framework.

Peer input was received from six jurisdictions in respect of the exchanges of information on rulings received from the Netherlands. In general the input was positive, noting that information received was complete and in the correct format.

Introduction

913.  This peer review covers the Netherlands’ implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

914.  The Netherlands can legally issue the four following types of rulings within the scope of the transparency framework: (i) preferential regimes;1 (ii) cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) downward adjustments; and (iv) permanent establishment rulings. To the extent that conduit rulings are provided, in the Netherlands they are already covered under the second category. APAs and advance tax rulings are co-issued by a specialised team based in Rotterdam and the competent local tax inspector. Rulings on preferential regimes are mostly co-issued by specialised teams within the Dutch tax administration and the competent local tax inspector. Certain forms of PE rulings (as well as some rulings that would fall into the APA category) are issued by local tax inspectors throughout the country. Rulings are not published. However, the Netherlands are publishing a description of the most frequent types of rulings and provide one or more example for each type.2 Additionally the APA/ATR-Team publishes a report which discloses the number of centrally issued rulings, i.e. APAs and ATRs, which is accessible on the internet.3

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

915.  For the Netherlands, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

916.  In the prior year peer review report, it was determined that the Dutch tax administration’s undertakings to identify past rulings and all potential exchange jurisdictions met all the ToR except for identifying all past rulings (ToR I.4.1.1) as the process of identifying past rulings was not completed in time. The Netherlands were recommended to complete its information-gathering process on past rulings as soon as possible.

917.  The Dutch tax administration committed in last year’s review to have the information-gathering process on past rulings completed in 2017. It has confirmed that the identification process was completed by 31 December 2017. A total of 1 901 additional past rulings were identified during the year of review. The Dutch tax administration’s procedures to identify past rulings therefore meet the minimum standard and no recommendations are made.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

918.  For the Netherlands, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

919.  In the prior year peer review report, it was determined that the Dutch tax administration’s implementation of a new system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. In the year in review. The Dutch tax administration amended the procedure to enhance the timeliness of the processes in place. With effect from 9 May 2017 all taxpayers applying for a cross-border ruling are obliged by a new Decree on Administrative Law in Tax Matters to fill out the template containing all the information to identify the category of ruling and the potential exchange jurisdictions. The respective tax inspectors remain responsible for ensuring that the template is completed correctly, and that rulings, which have not been identified by the taxpayer as being cross-border are nonetheless identified as being in scope of the transparency framework. Furthermore, all rulings on which information needs to be exchanged are registered in a centralised database since September 2017. The Netherland’s implementation continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

920.  In the prior year peer review report, it was determined that the Dutch tax administration’s review and supervisions mechanisms were sufficient to meet the minimum standard. The Dutch tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

921.  The Netherlands has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

922.  The Netherlands have the necessary domestic legal basis to exchange information spontaneously. The Netherlands note that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

923.  The Netherlands is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 142 jurisdictions.4

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

924.  In the prior year peer review report, it was determined that the Netherlands’ process for the completion and exchange of templates was sufficient to meet the minimum standard, except that information on past rulings was exchanged with considerable delay due to the large number of past rulings that had to be exchanged. The Netherlands was recommended to continue to ensure that all information on past rulings was exchanged as soon as possible and to fulfil its commitment to compete the exchange of information on past rulings by no later than 31 December 2017. The Netherlands met its commitment and completed the exchange of information on past rulings by 31 December 2017. Furthermore, the Netherlands met the timelines for exchanging information on future rulings and is in addition expected to reduce the time of transmitting information on future rulings to the Competent Authority as they issued a Decree in May 2017, which obliges taxpayers to provide all necessary information to be filled in the template before a ruling is issued.

925.  Regarding the completion of the summary section of the template, the Netherlands has introduced “standard” paragraphs for each type of ruling, which are completed with the specifics of the individual ruling and if needed, are adapted to the case at hand. Those standard paragraphs include the names of the involved parties and where they are based, the value of the transaction and as applicable the activities of the applicants, the nature of the transactions and/or the transfer pricing methods used.

926.  The timeliness of exchanges is as follows.

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	4 436	0	N/A	This reflects the exchanges on the 1 901 past rulings identified during 2017 and includes exchanges with new Inclusive Framework members
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	1 238	0	N/A
Total	5 674	0

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	61	98 days	N/A

Conclusion on section B

927.  The Netherlands has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges on time. The Netherlands has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

928.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	2 446	Argentina, Armenia, Aruba, Australia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China (People’s Republic of), Colombia, Croatia, Curaçao, Cyprus,1 Czech Republic, Denmark, Egypt, Estonia, Finland, Former Yugoslav Republic of Macedonia France, Georgia, Germany, Ghana, Greece, Hong Kong (China), Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Morocco, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saint Eustatius, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Chinese Taipei, Thailand, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Viet Nam
Cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	2 851	Argentina, Armenia, Aruba, Australia, Austria, Barbados, Belarus, Belgium, Belize, Bosnia and Herzegovina, Brazil, Bulgaria, Cameroon, Canada, Chile, China (People's Republic of), Colombia, Costa Rica, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Ghana, Gibraltar, Greece, Guernsey, Hong Kong (China), Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Jordan, Kazakhstan, Korea, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldavia, Morocco, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saint Eustatius, Samoa, Saudi Arabia, Senegal, Serbia, Singapore, Sint Maarten, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Suriname, Sweden, Switzerland, Chinese Taipei, Thailand, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela, Viet Nam, Zimbabwe
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	107	Armenia, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, China (People's Republic of), Curaçao, Cyprus, Denmark, Finland, France, Germany, Hong Kong (China), Hungary, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, New Zealand, Poland, Qatar, Romania, Russia, Spain, Sweden, Switzerland, Chinese Taipei, Thailand, Turkey, Ukraine, United Kingdom, United States, Uruguay
Permanent establishment rulings	270	Aruba, Australia, Austria, Belgium, Brazil, Canada, China (People's Republic of), Colombia, Curaçao, Czech Republic, Denmark, Finland, France, Germany, Hong Kong (China), Hungary, Ireland, Italy, Japan, Jersey, Liechtenstein, Luxembourg, Mexico, Norway, Poland, Portugal, Romania, Russia, Saint Eustatius, Serbia, Sint Maarten, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Arab Emirates, United Kingdom, United States
Related party conduit rulings	N/A	N/A
De minimis rule	N/A	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	If they have a ruling, the number is included in the rulings related to preferential regimes.2	N/A
Total	5 674

1. Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

2. It is noted that the Netherlands is using the same code to exchange information on new entrants of the grandfathered IP regime, entrants of the new innovation box, entrants of the new innovation box benefitting from the third category of assets, and beneficiaries of the shipping regime. Therefore exact figures of new entrants benefitting from the grandfathered regime and from the third category of assets as required for statistical purposes cannot yet be provided.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

929.  In the prior year peer review report, it was determined that the Netherlands’ implementation regarding matters related to intellectual property regimes was sufficient to meet the minimum standard except for the exchange of information on new entrants benefitting from the grandfathered IP regime.

• New entrants benefitting from the grandfathered IP regime: as the Dutch IP regime was in nearly all cases offered by way of ruling, new entrants (both new taxpayers and new assets of existing taxpayers) benefitting from the grandfathered IP regime were identified using the approach described above for past rulings on preferential regimes. Therefore, the completion of the exchanges was also subject to some delays. It was recommended that the Netherlands continue to ensure that all information on past rulings, including rulings on new entrants to the IP regime, is exchanged as soon as possible. The Netherlands completed the exchange on those rulings by 31 December 2017.

  New entrants (both new taxpayers and new assets of existing taxpayers) who did not apply for a ruling can be identified once they have filed their corporate income tax returns. The tax return form was amended and now includes a question as to whether the taxpayer applied the provisions of the innovation box. If the taxpayer indicated this, the tax return will be flagged for the tax inspector. If the taxpayer has requested a ruling, the information was already exchanged. If a tax inspector comes across information that still needs to be exchanged, he will make sure a template is filled out and exchange the information accordingly.

• Third category of IP assets: there is no requirement to apply for a ruling in order to benefit from the new innovation box, but the Netherlands notes that in practice most taxpayers do apply for a ruling. If this is the case, information on that ruling is exchanged within the applicable timelines for future rulings. To the extent that a taxpayer does not apply for a ruling in order to obtain the benefit from the third category of assets, his tax return is treated the same way as described above with respect to new entrants, meaning that the Netherlands would exchange information on all taxpayers that applied the provisions of the innovation box who fall into the definition of small and medium enterprises regardless whether they have applied for a ruling or not. The Netherlands is currently evaluating ways to collect information and reporting information to the FHTP as part of the ongoing monitoring requirements set out in the Action 5 Report (OECD, 2015).

• Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: not applicable as the regime does not allow the nexus ratio to be treated as a rebuttable presumption.

930.  As nearly all taxpayers apply for a ruling to benefit from the grandfathered regime or from the third category of IP assets under the new innovation box, the information is exchanged in the same manner as past rulings (regarding new entrants to the grandfathered regime) and future rulings (regarding taxpayers benefitting from the third category of IP assets). However, it is possible that there could be a number of taxpayers who did not apply for a ruling. With respect to the new entrants to the grandfathered regime, these will be identified by the tax return and exchanged upon in due course. With respect to taxpayers benefitting from the third category of assets, the Netherlands is recommended to continue its efforts to identify and exchange information on taxpayers benefitting from the third category of IP assets as soon as possible.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Although most taxpayers benefitting from the third category of assets in the new IP regime obtain a ruling and are identified and exchanged upon in accordance with the process used for all other rulings, the Netherlands is not yet able to identify taxpayers benefitting from the third category of assets in the IP regime to the extent they do not obtain a ruling.	The Netherlands is recommended to continue its efforts to identify and exchange information on taxpayers benefitting from the third category of IP assets as soon as possible.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  With respect to the following preferential regimes: 1) Innovation box and 2) International shipping.

← 2.  www.rijksoverheid.nl/ministeries/ministerie-van-financien/documenten/kamerstukken/2018/02/18/bijlage-v-jaarverslag-apa-atr (accessed 20 November 2018).

← 3.  www.rijksoverheid.nl/documenten/kamerstukken/2017/05/23/beschrijving-apa-atr-praktijk (accessed 20 November 2018).

← 4.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. the Netherlands also has bilateral agreements with Albania, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Bermuda, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China (People’s Republic of), Croatia, Curacao, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Ghana, Greece, Hong Kong (China), Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Kenya, Korea, Kuwait, Latvia, Lithuania, Luxembourg, Malawi, Malaysia, Malta, Mexico, Moldova, Montenegro, Morocco, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saint Martin, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Suriname, Sweden, Switzerland, Chinese Taipei, Tajikistan, Thailand, Tunisia, Turkey, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, Viet Nam, Zambia and Zimbabwe.