New decree on the arm's length principle and Transfer Pricing is published in the Netherlands

2 January 2019

The Decree on the application of the arm's length principle and the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration (OECD Guidelines) was published in Official Gazette no. 26874.

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Written by:
Jeroen Geers Manager Tax Advisory
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This Decree provides more attention to recent developments, including the results of the OECD Base Erosion and Profit Shifting (“BEPS”) project which, amongst others, aimed to bring the results of transfer pricing in line with the value creation within an Multinational Enterprise. This project has led to changes in the OECD guidelines. To the extent that these changes to the OECD Guidelines consist of a further clarifications regarding the application of the arm's length principle, then these are considered to also apply to years during which these clarifications were not yet published.

The most important changes contained in the Decree relative to the former decree are the following:

  • a clarification of the process during which a to-be-evaluated transaction between related parties is characterized (section 2.1 of the Decree);
  • a further explanation on the application of the transfer pricing methods in specific situations (various sections);
  • adjusting of the paragraph on the pricing of transactions involving intangibles assets when the valuation is highly uncertain at the time of the transaction (section 5.2 of the Decree);
  • a new paragraph on hard-to-value intangibles assets (section 5.3 of the Decree);
  • a new paragraph on the purchase of shares in an unrelated entity that is followed by a business restructuring (section 5.4 of the Decree);
  • a new paragraph on the remuneration of low-value-adding services (section 6.3 of the Decree); and
  • Textual changes to better match the used terminology with the terminology as used in the adjusted OECD guidelines.

A link to the Decree (in Dutch wording) can be found here.

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