1. Dutch Supreme Court ruling on beneficial ownership

In the decision of the Dutch Supreme Court of 19 January 2024 (ECLI:NL:HR:2024:49), the Court provided further guidance on how to test whether a taxpayer should be considered the recipient (opbrengstgerechtigde) and the beneficial owner (uiteindelijk gerechtigde) of a dividend. Both conditions need to be met if a taxpayer claims a credit or refund of Dutch dividend withholding tax.
The case concerned a Dutch entity that acquired (long) equity positions in Dutch listed shares which positions were hedged via (short) future positions. The Dutch entity on lent the Dutch equities to a group entity which shares were returned to the Dutch entity shortly before dividend date. 
In its decision, the Supreme Court ruled that the relevant sections of the statute defining cases in which the taxpayer should not be considered the beneficial owner of a dividend (the so-called anti-dividend stripping rules) provide a clear set of conditions that need to be tested, not leaving room for an ‘extensive’ interpretation of these rules as the court of appeal did. The Supreme Court therefore adhered to a more statute based interpretation of the beneficial owner requirement than the court of appeal. The Supreme Court referred the case to a different court of appeal to further review whether the taxpayer can be considered the beneficial owner of the dividend as well as the recipient of the dividend. For purposes of the latter condition, French civil law must also be taken into consideration by the referral court.
The Supreme Court further addressed a procedural tax law item relating to the question whether the taxpayer’s books and records (administratie) met all relevant legal requirements. The Dutch tax authorities argued that this was not the case (potentially resulting in a shift of the burden of proof to the taxpayer) partly because the taxpayer’s books and records did not make clear what role the taxpayer played in the executed trades with respect to the shares to which the litigious dividends pertained. The Dutch Supreme Court, however, did not share this view and found (in short) that it is sufficient if the taxpayer’s books and records show with whom, when and under which terms and conditions the taxpayer carried out the transaction in question as part of its business strategy. It is however not required that the books and records also show whether the transactions were executed by the taxpayer or on behalf of the taxpayer. The Dutch Supreme Court also ruled that if a trading strategy is not fully documented, this imperfection cannot be considered a shortcoming of the obligation to keep and retain books and records (administratie- en bewaarplicht).
Our comments
This is an important tax case in view of the current focus of the Dutch tax authorities on the anti-dividend stripping rules. This focus is also demonstrated by the fact that currently six beneficial owner/dividend stripping cases are pending before tax courts and that cases are being investigated from a criminal law point of view. The Dutch tax authorities recently also announced that a specific team within the tax authorities (Coördinatiegroep Taxhavens en Concernfinanciering) needs to be involved by the tax inspector in potential dividend stripping cases. The tax law in this regard also changed on 1 January 2024, whereby the burden of proof of being the beneficial owner of a dividend shifted to the taxpayer. Under the applicable rules until 1 January 2024 it was up to the tax inspector to demonstrate that the conditions to apply the anti-dividend rules were met. In parliamentary history it was also mentioned that currently it is being reviewed whether additional measures need to be taken to counteract dividend stripping. The results likely will become public in the beginning of 2025. The Supreme Court ruling also makes it clear that not all information that the tax authorities deem relevant to determine the tax position of a Dutch taxpayer also considers information that should be included in the books and records of the taxpayer.   .  

2. Legitimate expectations in the case of an issued fiscal unity decision

In its decision of 1 December 2023 (ECLI:NL:HR:2023:1675), the Dutch Supreme Court answered the question whether a tax inspector is bound by an issued Dutch Corporate income tax (CIT) fiscal unity ruling (beschikking fiscale eenheid vennootschapsbelasting).
In this decision, the Supreme Court made it clear that a fiscal unity for CIT purposes (fiscale eenheid vennootschapsbelasting) will not be established if the relevant requirements are not met. The rationale of a CIT fiscal unity ruling is to provide legal certainty to both the taxpayers involved and the Dutch tax authorities that a fiscal unity is in place. However, such a ruling itself does not create a CIT fiscal unity in cases where the fiscal unity conditions are not met. The Court decides that it is therefore not necessary to withdraw or revise a fiscal unity ruling in case the conditions are no longer met (which is in line with the relevant CIT rules).
The Supreme Court nevertheless decided that the tax inspector may be bound by an issued CIT fiscal unity ruling based on the principle of honouring legitimate expectations. A CIT fiscal unity ruling may under circumstances, as set out in earlier case law of the Supreme Court, qualify as an explicit statement (toezegging) by the inspector that a Dutch CIT fiscal unity was established on which can be relied by the taxpayer. For such legitimate expectations it is required, in short, that:
(i) the tax inspector has made the explicit statement after taking note of all the relevant facts and circumstances of the case (this requirement is not met if it is due to intent or gross negligence on the part of the taxpayer that incorrect or incomplete information was provided to the inspector, and the inspector took a decision (partly) on that basis);
(ii) the taxpayer may derive from the explicit statement that the tax authorities will apply the relevant rules in a certain way in his case; and

(iii) the explicit statement is not so clearly contrary to a correct application of the law that the taxpayer could and should have reasonably realized its incorrectness, and therefore could not reasonably count on observance of that statement.
Furthermore, the Dutch Supreme Court adds that in case the explicit statement of the tax inspector is made by means of a fiscal unity ruling the above does not only apply if the tax inspector has actually taken notice of all relevant facts and circumstances of the case, but also if the taxpayer could reasonably assume that the inspector has taken notice of all facts and circumstances that the inspector deems necessary for the statement made by him. For the assessment of this assumption, it is primarily up to the taxpayer requesting for a fiscal unity decision to provide relevant information, but this does not alter the fact that the inspector is held to a careful preparation of his decision.

Our comments
The most important takeaway from this ruling is that in certain circumstances an issued CIT fiscal unity ruling should be respected based on the principle of honouring legitimate expectations (vertrouwensbeginsel), even in contra legem situations (e.g. if it is later found that the taxpayer has not met the relevant requirements to establish a CIT fiscal unity). We note that a similar approach was taken by the Supreme Court with respect to a fiscal unity ruling for VAT purposes (Dutch Supreme Court decision of 18 February 2022, ECLI:NL:HR:2022:269). Regarding a fiscal unity for VAT purposes, it should be noted that a VAT fiscal unity can (also) be in place if taxpayers meet the relevant fiscal unity requirements; a VAT fiscal unity ruling as such therefore is not legally required (contrary to a fiscal unity for CIT purposes where a CIT fiscal unity ruling is legally required for a fiscal unity to be in place).
For both CIT and VAT fiscal unity rulings issued, it should be assessed on a case-by-case basis whether an issued fiscal unity ruling may have raised legitimate expectations if it is later found that not all the conditions to establish the fiscal unity were met. The Supreme Court decision also makes it clear that legitimate expectations may, in principle, arise only if a taxpayer requesting a fiscal unity ruling has presented all the relevant facts and circumstances to the Dutch tax authorities. The taxpayer cannot successfully invoke legal protection of his expectations in case he has provided incorrect or incomplete information to the tax inspector, and the taxpayer should have known that the tax inspector therefore was not able to properly assess the fiscal unity request. This is in line with standard case law of the Dutch Supreme Court.

3. Information requests addressed to dissolved entities 

If a taxpayer fails to comply with certain information requests of the Dutch tax authorities, the tax inspector may issue an administrative decision (informatiebeschikking) in the taxpayer’s name, thereby formalising the information request. When that decision becomes final and the taxpayer fails to provide the requested information, that may shift the burden of proof to the taxpayer and increase that burden of proof. In its decision of 21 April 2023, ECLI:NL:HR:2023:543, the Dutch Supreme Court ruled, among other things, that from the moment a legal entity ceases to exist (e.g. is liquidated), it is in principle no longer possible to impose (information) obligations on the legal entity as long as its liquidation (vereffening) has not been reopened. In line with this decision, the Dutch Supreme Court also decided that in such situation it is in principle no longer possible to issue an administrative decision (informatiebeschikking) in the taxpayer’s name to formalise a request for information.
Our comments
This ruling provides more clarity on information obligations towards the Dutch tax authorities of legal entities that have been dissolved. In our view this ruling is also of relevance in situations regarding third-party investigations involving dissolved entities. With respect to the imposing of tax assessments on dissolved entities, we note that it follows from case law of the Dutch Supreme Court that, in principle, the tax inspector may impose a tax assessment on a dissolved taxpayer, but that the legal consequences of the tax assessment nevertheless only take effect after a legally valid notification (bekendmaking) of the tax assessment, which in principle could only take place after reopening the liquidation (vereffening) of the dissolved entity (cf. the Supreme Court ruling of 18 August 2023, ECLI:NL:HR:2023:1097, 21 April 2023, ECLI:NL:HR:2023:542, and 19 September 2003, ECLI:NL:HR:2003:AK8288). We note in this regard that since 1 January 2019 the Dutch Collection of State Taxes Act (Invorderingswet 1990) sets out an alternative way to issue (bekendmaken) tax assessments to taxpayers that have ceased (or have presumably ceased) to exist.

4. Correspondence with the DTA around the filing of a tax return and the imposing of penalties

In the decision of 15 December 2023, the lower tax court of the Court of Noord-Holland (ECLI:NL:RBNHO:2023:12635) ruled on a case involving a multinational whereby various transfer pricing adjustments were made by the Dutch tax authorities. One of those adjustments (in short) related to the termination of licence agreements held by the Dutch entity that, according to the tax authorities, resulted in a ‘shift in value’ to a UK (group-)entity which shift was subject to Dutch CIT. In addition to the TP adjustment, a significant fine was also imposed on the taxpayer. In its decision, the tax court upheld both the TP adjustment and the fine imposed.
With regard to the tax penalty, the taxpayer argued, among other things, that there was no room for such a fine because  around the time of the filing of the Dutch CIT return a letter was sent to the Dutch tax authorities in which reference was made to the termination of the licence agreements, an issue that was also discussed with the Dutch tax authorities in an attempt to reach a compromise. The lower tax court did not accept this view taken by the taxpayer, but found that by not allocating value to the (terminated) licences, an incorrect tax return was intentionally filed. According to the lower court, the fact that correspondence had taken place with the Dutch tax authorities did not alter the intent.    
Our comments
In this tax case, an interesting question is addressed by the taxpayer on which little case law is available. Generally, it could be argued that if certain items were discussed and fully disclosed to the Dutch tax authorities at the time of the filing of the tax return, that should be a mitigating factor in imposing a tax penalty on the taxpayer. It is difficult to conclude from the case at hand to what extent (and in how much detail) the termination of the licence agreements was discussed with the Dutch tax authorities. This may become clearer before the court of appeal. In this regard we also refer to the article that we published in which the question was also discussed to what extent the disclosing of information to the Dutch tax authorities around the filing of a tax return could be a mitigating factor to impose an tax penalty on the taxpayer (see Over het delen van in te nemen standpunten en zienswijzen met de Belastingdienst’, Weekblad voor Fiscaal Recht 2021/140).

5. New procedural tax law obligations in the Dutch implementation of Pillar Two

The Minimum Tax Rate Act 2024 (Wet minimumbelasting 2024; MTRA), the Dutch implementation of Pillar Two (EU Directive 2022/2523), imposes a specific information obligation (inlichtingenverplichting) on taxpayers to actively provide the Dutch tax authorities with correct and complete information that may be relevant in determining amounts of tax due under the MTRA. Such information must be provided to the Dutch tax authorities within two weeks after the taxpayer becomes aware that such information was not provided, or was incorrectly or incompletely provided. Non-compliance with the information obligation can, under certain circumstances, be sanctioned with a tax penalty (vergrijpboete) or criminal prosecution.
A second point for attention is that the MTRA introduced a far-reaching joint and several liability provision for the amount of taxes due based on the MTRA that may also include non-Dutch group entities.

Our comments
With respect to the information obligation, a key point for attention is the (relatively short) notification period of two weeks, whereby it is also the question at which point in time the two-week period commences (e.g. at the time the financial accounts of a company are being prepared). The introduced joint and several liability provision for MTRA purposes is a point for attention that should be carefully reviewed, for example in the case of reorganisations. We note that the far-reaching scope of the joint and several liability provision is currently also being debated in tax literature, whereby it is questioned whether the broad scope of the provision is compatible with EU law. In our recent article, we also discussed several aspects of the MTRA from a procedural tax law perspective (see ‘Formeelrechtelijke aspecten in de Nederlandse implementatie van Pillar Two’, Weekblad Fiscaal Recht 2023/291). For more background on Pillar Two, we also refer to our earlier Tax Alerts of 14 August 2023 and 6 June 2023.


Please contact your Stibbe tax lawyer for more detailed information or to discuss the implications for your business.