Last Friday 28 June 2019, the Decree on the revised international tax ruling practice as issued by the Dutch Ministry of Finance has been published. The Decree has become effective as per today 1 July 2019.
This Decree is in line with the draft Decree as published in April 2019 on which we reported in our tax alert of 25 April 2019. Click here for this alert. The draft Decree and other elements of Dutch ruling practice were recently discussed by the Dutch Parliamentary Committee for Finance and the State Secretary for Finance on 4 June 2019. This, however, did not result in any significant changes to the drafting of the final Decree.
The Decree applies to international tax rulings relating to Dutch corporate income tax, Dutch dividend withholding tax and the application of tax treaties and other instruments for the avoidance of international double taxation.
In summary, as from today, it is only possible to obtain a Dutch international tax ruling provided that:
- the relevant taxpayer has sufficient ‘economic nexus’ with the Netherlands. This new economic nexus concept replaces the (minimum) Dutch substance requirements that currently need to be met in certain cases to obtain a tax ruling;
- the sole or decisive motive of the relevant structure is not to avoid Dutch or foreign taxes; and
- no companies are involved in the relevant transaction or structure which are included on the Dutch list of so-called ‘low-tax jurisdictions’ and/or the EU list of non-cooperative jurisdictions.
An international tax ruling will terminate in case of a relevant change in law or regulations. An explicit provision to that extent must be included in the ruling. In that respect, additionally, the Decree notes that a change in relevant policy or case law may lead to the termination of an international tax ruling.
To increase transparency, a fully anonymised summary of each ruling will be published by the Dutch tax authorities. The same holds true for a withdrawn or denied ruling request.
As indicated in our tax alert of April, the Decree does not refer to existing rulings. Hence, it seems that such rulings continue to be applicable for the remaining time as included in the rulings (assuming that all relevant conditions are still met).
The precise impact of the revised Decree on existing and new international tax rulings must be assessed on a case by case.