Dutch Ministry of Finance Report on Tax Rulings

Aug. 2, 2021, 7:01 AM

The Dutch Ministry of Finance has published a 2020 report on Dutch tax rulings with an international character (2020 Report). Such rulings cover advance pricing agreements (APAs), advance tax rulings (ATRs) and many cover the Innovation Box (concerning the development of technical innovation in the Netherlands). This article will discuss the 2020 Report, mainly focusing on APAs.

The 2020 Report, published on June 17, 2021, is particularly interesting because it covers 2020 (a full 12 months). As from July 1, 2019, the Dutch ruling practice became stricter. In the second half of 2019 (six months), 298 ruling requests in total were submitted and 176 requests were handled. The 2020 Report also notes that 2020 was a “special year” because of the Covid-19 pandemic (with many virtual ruling contacts).

The Covid-19 pandemic also had international consequences for the progress of various projects. Ruling experience is still being developed with all parties—government, taxpayers and their advisers. This is evidenced by the fact that a significant part of the initial ruling requests (filed) in 2020 did not result in any rulings. However, in 2020 642 ruling requests were received and 600 requests handled. Whether these 2020 full-year figures will be indicative of coming years remains to be seen.

Dutch Rulings with Effect from July 1, 2019

For the rules with effect from July 1, 2019, see the ruling Decree of June 19, number 2019/13003. The author summarized these rules as follows in three key topic areas and added the relevant 2020 Report data:

  • Transparency: A summary of individual (anonymized) rulings is published and (an) annual report(s) is required relating to rulings and a periodic investigation thereof by independent committee(s)—from 2018 onward.
  • Process: central coordination by the Ministry of Finance of all rulings with an international character and ia formal ruling approval is required for each ruling of the International Tax Certainty Board (College Internationale Fiscale Zekerheid or “IFZ”).
  • Key Content Changes:
    • Stricter “economic nexus” for Dutch substance;
    • Motive test: no ruling if the decisive motive is to save Dutch or foreign tax;
    • No ruling for transactions with entities in EU black-listed or low taxed (< 9%) jurisdictions;
    • Maximum term of a ruling in principle four or five years; by exception a maximum 10 years with evaluation after five years;
    • Specified format for any ruling: “settlement agreement” being a legally binding agreement.


This 2020 Report covers all the rulings issued during the second half of 2019 and checked by the independent ruling committee: these and the published summaries thereof were all found in accordance with the applicable Dutch tax law. This is in line with the earlier (2014) findings of the Dutch Court of Audit (Rekenkamer): all the 2018 ruling summaries published were considered adequate.

Process and Content

The following developments are important in 2020 according to the 2020 Report (as of July 1, 2019):

  • no new advance certainty is provided when converting “CV”—limited partnership—structures involving the transfer of intangible assets into the Netherlands;
  • no advance certainty is provided on informal capital and deemed dividend situations. This also means where there is difference between the commercial and fiscal results such will be looked into very critically in the context of a ruling;
  • in 2020, the European Commission extended the tax state aid investigation into one Dutch “BV” (private limited company);
  • in assessing (sufficient) economic nexus, attention is also paid to the relationship between the Dutch and the comparable functionality elsewhere within the group/multinational enterprise. When assessing whether there is sufficient economic nexus, one looks at i.e. the relationship between the Dutch locally performed functions, assets, or activities performed, and
  • compares this to comparable three factors within the group abroad.

A relevant reflection of all the activities is typically evaluated in a ruling context, both quantitatively, and above all qualitatively.

For example, if a Dutch company manages a certain amount of assets, it is determined how many such assets the multinational group manages outside the Netherlands and whether the functionality in the Netherlands is reasonably proportionate to the comparable functionality outside the Netherlands.

Furthermore, hiring of staff—irrespective of whether or not the counterparty is affiliated—may be considered under an economic nexus test, provided such staff performs its activities in the Netherlands, or if outside the Netherlands the taxpayer must have sufficient staff in the Netherlands and be able to manage that staff abroad.

Given the situs principle (meaning real estate is taxable in the country of its location), owning real estate in the Netherlands is a strong indication that there is sufficient economic nexus, also if the functionality of the interested party in the Netherlands is limited in this respect.

The strict conditions under which and on the basis of which certainty can be obtained in advance for financing activities with a real Dutch significance have been specified as follows.

As the 2020 Report shows, there is sufficient economic nexus with regard to financing activities whose flows are included in the Dutch accounts if there are relevant (treasury/finance) functions in the Netherlands to manage these financing risks.

There is also a sufficient economic nexus in case of shared control, as described in the Organization for Economic Co-operation and Development (OECD) transfer pricing guidelines.

If the functionality in the Netherlands is insufficient in terms of control, such is qualified as supportive functions.

No rulings are granted on a transfer of intangible assets if such transfer is made from a jurisdiction (including out of CV):

  • without a final (tax) settlement on the fair market value of those assets at the time of transfer; or
  • no relevant DEMPE (development, enhancement, maintenance, protection and exploitation) functions are performed with regard to these intangible assets abroad.

Regular APA Statistics

According to the 2020 Report, 53 regular unilateral APA summaries were published during 2020, covering the following activities (including the APA number for that activity):

  • Sales: 17;
  • Sales support: 8;
  • Production: 7;
  • Purchasing: 2;
  • Research & Development: 2;
  • Logistics 5;
  • HQ: 3;
  • Profit split: 2;
  • Administrative support: 4;
  • IT support 1;
  • Valuation: 2.

The 2020 Report shows that it is possible that in an APA, instead of an annual remuneration (typically a net cost-plus or a net operating margin), an average renumeration is agreed over the full term of the APA (a so-called term test).

Also an additional 12 bilateral and multilateral APAs were granted during 2020, albeit the anonymized summaries do not show the name(s) of the other countries involved, the author notes.


Certainty in advance in terms of rulings/APAs will remain important in a period during which the (tax) rules for international enterprise are subject to considerable change.

There were many changes in 2020 in an OECD, EU and Dutch context. In coming years there will also be more important and interesting developments, not only with respect to transfer pricing but also with respect to the Anti-Tax Avoidance Directive 2 and per January 1, 2021 as regards liquidation tax loss changes and conditional withholding tax changes on interest and royalties, and OECD and EU initiative effects, in particular on Pillar 1 and 2.

Finally, as for every ruling (including APAs) an anonymous summary is created and published, the new ruling practice is becoming increasingly clear.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Eduard Sporken is Director, KPMG Global Transfer Pricing Services.

The author may be contacted at: sporken.eduard@kpmg.com

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