International measures regarding tax evasion
In the past few years, tax evasion has become a hot topic in the Netherlands and the European Union. Big corporations such as Starbucks, Google and Amazon have been confronted with additional tax assessments, because they were abusing the tax systems and tax treaties to gain significant benefits. As a consequence of this, several anti-abuse measures have been taken in order to prevent future tax avoidance. Below, we will inform you about some of the relevant measures.
One of the projects that gained the most attention is the OESO/G20-initiated project against “Base Erosion and Profit Shifting” (BEPS-project). As a result of this project, new measures have been implemented in local legislation. An example is that multinationals that meet certain requirements, such as a treshold of consolodated remunerations, have to draft up additional documentation regarding their transfer pricing policies. This way the tax authorities of the different countries get additional insight on in what countries the profits of the multinational are being taxed and how much taxes are actually paid. Besides that, the tax authorities also gain valuable additional insights on wether or not the group companies withing the multinational are trading on an “at arm’s length” basis. Another consequence of the BEPS-project is the Multi-lateral instrument (MLI), which makes it possible to adopt several measures for several tax treaties at once. One of the measures proposed in the MLI is that Parent Entities need to have a certain degree of economic substance before they get access to the tax treaties. The expectation is that the MLI will turn into force in june of this year.
Anti Tax Avoidance Directive (ATAD)
Another important measure is the Anti-Tax Avoidance Directive (ATAD) that has been presented in 2016. This directive proposes measures, among others, on CFC-legislation, interest deduction, departure/exit taxes and the dismantling of hybrid structures within the European Union. On 21 Februari 2017, the ATAD has been revised, updated and approved by the ECOFIN Counsel. After this update, the ATAD (also known als ATAD2) is also targetting hybrid structures in relation to countries outside of the European Union. Because ATAD2 is targetting hybrid structures, this is considered to be a problem for US-based companies with juridical structures and activities in the Netherlands. Because of differences in local US and Dutch legislation, taxation could be deferred or even avoided by using hybrid structures. After the ATAD2 comes into force, the local legislation of the countries will have to be alligned in cases of a hybrid mismatch structure, that that the tax avoidance can no longer occur. With president Trump announcing that he wants to “bring home the cash overseas” in his tax plan, ATAD2 provides yet another incentive to leave the Netherlands.
National substance requirements?
Finally he Dutch Tax authorities have been asked to investigate the possibilities of additional national anti-tax avoidance measures. On November 4th 2016, a few options have been given. So far the Dutch tax authorities have been reluctant to implement national measures, because it would harm the Dutch business climate in relation to other European countries who have not implemented the same measures. With the new government being formed as we speak, this might change in the coming years. We will keep you posted.