On 14 November 2019, the Dutch Government accepted the final legislation for the further implementation of the Anti-Tax Avoidance Directive (‘ATAD’) as agreed upon by the European Union. Following ATAD1, the purpose of ATAD2 aims to prevent hybrid mismatches between EU countries and between EU countries and third country situations.
In short, ATAD2 aims to address hybrid mismatches which result in double deductions or in a deduction without inclusion of income in another state. The provisions of ATAD2 are included in the Dutch Corporate Income Tax Act from 1 January 2020.
In principle, the ATAD2 rules should not impact any transfer pricing mismatches between states. These mismatches could result from a different application or interpretation of the arm’s length principle.
Deemed payments (for tax purposes) between a head office and a permanent establishment may fall within the scope of ATAD2, if one state recognises such payments and the other state does not. However, it is outside the scope of ATAD2, if both states do recognise the deemed payment itself, but apply a different value to the payment on the basis of the arm’s length principle.
The Dutch Government has announced that it will research whether any additional rules are necessary for neutralising transfer pricing mismatches. An update on this topic is expected in the first quarter of 2020.
From 1 January 2019, the Netherlands have listed countries which do not have taxation on profits or do have a statutory tax rate of lower than 9% for taxation of profits. The Dutch list of low-taxed countries is, together with the EU-list of low taxed countries, relevant for the application of anti-tax avoidance measures such as Controlled Foreign Company rules for Dutch corporate income tax purposes and the Dutch withholding tax rules on interest and royalties from 2021. Also, the Dutch tax authorities do not grant rulings about transactions which are performed with companies that are included on these low-taxed country lists.
The Dutch list of low-taxed countries is updated annually. On 18 December 2019, the Ministry of Finance published the updated list of low-taxed countries. The updated list no longer includes Belize, Kuwait, Saudi Arabia and Qatar. Two countries, Barbados and Turkmenistan, were added to the list.
The following countries are now included on the Dutch list of low-taxed countries from 1 January 2020: Anguilla, Bahamas, Bahrein, Barbados, Bermuda, British Virgin Islands, Guernsey, Isle of Man, Jersey, Cayman Islands, Turkmenistan, Turks and Caicos Islands and the United Arab Emirates.
Additionally, the EU list of low-taxed countries includes: American Samoa, American Virgin Islands, Fiji, Guam, Oman, Samoa, Trinidad and Tobago and Vanuatu.
Hans Noordermeer
hans.noordermeer@bdo.nl
Niek de Haan
niek.de.haan@bdo.nl