Auteur: Blitskikker Haarlem

Next to the 2021 legislative proposals, certain announcements were made for following years:

• Per 2022, an extension of loss carry forward rules, with certain restrictions.
• Per 2022, transfer pricing adjustments targeting informal capital structures.
• Per 2022, Dutch holding companies to be added to the scope of the enhanced substance rules for Dutch financing & licensing companies.
• Per 2022, amendments to the refund mechanism for dividend withholding tax.
• Per 2024, dividend payments to be added to the scope of the new conditional withholding tax on interest & royalty payments to selected low-tax and non-cooperative countries.
• Further work will be done on the revision of the Dutch tax qualification rules of partnership entities, and the introduction of equity tax deductions.

See details on these announcements below.

Details on legislative proposals

COVID-19 Tax Reserve
As part of the Decree COVID-19 measures the Dutch government introduced the COVID-19 tax reserve. Tax payers who are faced with tax losses in 2020, can book a tax reserve for the amount of the expected 2020 tax losses in their 2019 corporate income tax return up to the amount of the 2019 taxable profits. This measure is now part of the proposed 2021 tax plan.

Introduction Withholding Tax Interest & Royalty Payments
To counter payments to off-shore structures, a new withholding tax will be introduced per 2021 on interest & royalty payments to affiliated entities which are resident in selected low-tax and non-cooperative countries (see country list below). The rate will be equal to the Dutch corporate income tax rate, see next bullet.

Decrease Corporate Income Tax Rate
The previously announced decrease of the corporate income tax rate of 25% to 21.7% has unfortunately been withdrawn. The lower bracket will decrease from 16.5% to 15% as per the previous announcement. The threshold for the lower bracket will be EUR 245,000 in 2021 and EUR 395,000 in 2022.

Investment Tax Benefits
It is proposed to provide tax payers with an incentive to invest in the Netherlands. Specific rules will be proposed to allow tax payers to deduct a percentage of investment amounts from wage taxes to be paid in 2021.

Enhanced substance Rules Dutch Financing & Licensing Companies
To discourage the use of letterbox companies, Dutch financing & licensing companies need to adhere to enhanced Dutch substance rules to avoid automatic exchange of information to source countries. The enhanced substance rules come down to office space and a minimum €100k annual employee cost for relevant activities.

Increase Effective Tax Rate Innovation Box Regime
As already announced earlier, the effective tax rate in the innovation box regime will be increased from 7% to 9%. The tax credit for withholding tax on royalty’s will be adjusted similarly.

Technical Adjustment Dutch Anti-Base Erosion Rules
The Dutch anti-base erosion rules could result in a tax exemption for the amount of negative interest or FX profits. The proposed adjustment does not allow for this positive result to be exempt from the taxable basis.

Details on announcements

Loss Compensation Rules
The loss carry-forward is proposed to no longer be limited in time. The loss carry-forward and carry-back will however be limited up to either EUR 1,000,000 or 50% of the profits, whichever is higher.

Transfer Pricing Mismatches
To further address mismatches which result in tax advantages for especially multinationals, the Dutch government will publish a legislative proposal to eliminate transfer pricing mismatches in spring 2021. International intercompany transactions should be done at arm’s length. Where transactions have not be done at arm’s length, transfer pricing corrections are typically made. If the other country does not tax the transfer pricing correction into account and the Netherlands does, this results in a mismatch. In case the transfer pricing adjustment results in a lower profit in the Netherlands, but the other country does not increase the profit – or not in full – it is proposed that the Netherlands will no longer allow for the tax payer to take into account the lower profit. For example, where a Dutch company acquires an asset from a foreign subsidiary and books this asset against market value, but the selling subsidiary only takes into account the purchase price in their profit, the Netherlands will no longer allow for this ‘step up’ to be taken into account.

New Rules Dutch Holding Companies
In order to discourage the use of letterbox companies, Dutch holding companies will – similar to Dutch financing and licensing companies – be required to avail of enhanced substance in the Netherlands, at the penalty of automatic exchange of information with the relevant source country(ies).

Refund Dividend Withholding Tax
Currently Dutch tax payers can request for a refund of dividend withholding tax paid in the case they are in a loss position. Foreign tax payers, who are not subject to Dutch corporate income tax, cannot request for such a refund. To comply with EU law, the Dutch government intends to no longer allow for a refund of dividend withholding tax in case the Dutch tax payer is in a loss position as per 2022. In such case the credit of the dividend withholding tax will be carried forward to a following tax year. An upside is that in the meantime a Decree will be published which temporarily allows foreign tax payers to request for a refund of the Dutch withholding tax paid on dividends.

Conditional Withholding Tax Dividends
In spring 2021 the Dutch government will publish its legislative proposal for a conditional withholding tax on dividends, applicable to dividends paid to related entities in low-tax or EU blacklisted jurisdictions, or in cases of abuse. It is expected that this will enter into force as per 2024.

Equity Tax deductions
In order to come to a more balanced approach to the Dutch tax treatment of equity versus debt financing, the government has announced to review the possibility to introduce a tax deduction on equity financing.

Amendments Dutch Partnership Qualification Tax Rules
Triggered by the hybrid mismatch overkill resulting from the European ATAD2 directive, the Dutch government is reviewing the Dutch tax qualification rules for Dutch and foreign partnership entities.

 Annex: list of low-tax and non-cooperative jurisdictions (as applicable in 2020)

American Samoa, Barbados, Guam, Samoa, Vanuatu, American Virgin Islands, Bermuda, Guernsey, Turkmenistan, Anguilla, British Virgin Islands, Isle of Man, Turks and Caicos Islands, Bahamas, Cayman Islands, Jersey, Trinidad and Tobago, Bahrain, Fiji, Oman and United Arab Emirates.

More information?

For more information, please contact Evert-Jan Spoelder or Gerriët Nagelhout.

To read the Dutch contribution of Jimmie van der Zwaan and Thomas Dijksman of Taxand Netherlands: click here.

More information?

If you have any questions, with regard to this article, please contact Jimmie van der Zwaan or Thomas Dijksman.

To read the Dutch contribution of Jimmie van der Zwaan and Thomas Dijksman of Taxand Netherlands: click here.

More information?

If you have any questions, with regard to this article, please contact Jimmie van der Zwaan or Thomas Dijksman.

As Europe needs foreign investments, the publication focusses on financing and the (differences in) implementation of the ATAD Directives by various Member States. The publication addresses deductibility of interest expense and hybrid mismatches. The aim of the publication is to provide practical, but detailed, guidance on the interpretation and application of these two items of the ATAD Directives both to tax practitioners and to international investors, with contributions from Taxand member firms in the Netherlands, Italy, Spain, Luxembourg, Germany and France.

Please click here to read the ATAD-Directives publication .

Please contact your trusted Taxand Netherlands advisor for more details.

Het kabinet heeft voorzien in een pakket aan steunmaatregelen om de financiële gevolgen van het coronavirus voor ondernemers te verzachten en hen de benodigde bestedingsruimte te geven. Daarnaast is er een aantal mogelijkheden die ondernemers zelf kunnen overwegen om hun liquiditeit te vergroten. Denk hierbij aan het verlagen van voorlopige aanslagen voor de inkomstenbelasting en vennootschapsbelasting. In algemene zin zijn de fiscale mogelijkheden waar ondernemers zelf over na kunnen denken erop gericht om belastingteruggaven naar voren te halen en de huidige acute fiscale verplichtingen binnen de kaders van reeds bestaande wettelijke mogelijkheden te beperken of te verschuiven naar later in het jaar, wanneer de liquiditeit van de onderneming is verbeterd.

Hierna treft u overzicht van de diverse steunmaatregelen. U kunt op de steunmaatregel klikken voor nadere informatie.

• Versoepeling verliesverrekening in de vennootschapsbelasting (fiscale coronareserve)
• Eenmalige verhoging vrije ruimte werkkostenregeling
• Verlaging van het gebruikelijk loon bij omzetdaling
• Uitstel inwerkingtreding wetsvoorstel Wet excessief lenen bij eigen vennootschap
• Versoepeling urencriterium in het kader van de ondernemersfaciliteiten
• Versoepeling aflossingseis eigenwoningschuld (betaalpauze voor hypotheekverplichtingen)
• (Verdere) versoepeling bijzonder uitstel van betaling voor belastingschulden
• Meer duidelijk omtrent de melding betalingsonmacht
• Aanvraag tijdelijke Noodmaatregel Overbrugging behoud Werkgelegenheid (NOW 1.0) gesloten
• Voorwaarden NOW 2.0 bekendgemaakt – aanvraag mogelijk per 6 juli 2020
• Verlaging voorlopige aanslag inkomstenbelasting en vennootschapsbelasting 2020
• Verruiming gebruik G-rekening
• Uitstel verschuldigdheid energiebelasting en ODE
• Tegemoetkoming Vaste Lasten MKB (TVL)
• Tegemoetkoming ondernemers getroffen sectoren (TOGS)
• Tijdelijke overbruggingsregeling zelfstandig ondernemers (Tozo)
• Verruiming regeling Garantie Ondernemersfinanciering (GO)
• Rentekorting kleine ondernemers op microkredieten Qredits
• Tijdelijke borgstelling voor land- en tuinbouwbedrijven
• Verruimde borgstelling midden- en kleinbedrijf (BMKB)
• Corona-Overbruggingslening (COL) voor innovatieve start-ups en scale-ups

Daarnaast zijn er diverse sites waar u als ondernemer terecht kunt. Wij hebben de belangrijkste sites voor u opgesomd:

• Banken kunnen aanmeldingen voor de verruimde kredietregelingen (BMKB en GO) bij de RVO doen, de uitvoeringsorganisatie van het ministerie van Economische Zaken en Klimaat. Ondernemers melden zich hiervoor bij hun kredietverstrekker.
• Voor de belastingmaatregelen kunnen ondernemers terecht bij de Belastingdienst Zakelijk via nl/coronavirus. De regelingen van het ministerie van Sociale Zaken en Werkgelegenheid worden zo spoedig mogelijk opengesteld.
• Bij andere vragen over het coronavirus kunnen bedrijven kijken op nl/coronavirus of op het RIVM. Of ga naar de website van de Kamer van Koophandel.

Ook zijn er naast de steunmaatregelen nog een aantal mogelijkheden die u kunt overwegen om de financiële impact van het coronavirus te beperken. Hierbij kunt u denken aan:

• Heroverwegen van de BTW-aangifteperiode (bijv. van maand naar kwartaal of juist andersom);
• Factuurdata rond het einde van het BTW-aangiftetijdvak;
• BTW terugvragen over nog onbetaalde facturen;
• Vaststellen of beëindigen fiscale eenheid voor de BTW;
• Voorkoming van fiscale bestuurdersaansprakelijkheid;
• denk hierbij aan tijdig melden betalingsonmacht bij belastingschulden (met name bij loonbelasting en btw);
• Beperken van keten- en inlenersaansprakelijkheid.

Taxand wenst u heel veel succes, sterkte en gezondheid de komende periode. Wij hebben een gezondheids- en continuïteitsprocedure in werking gesteld, zodat wij onze cliënten zo optimaal mogelijk op afstand kunnen blijven bedienen. Uw vertrouwde partner blijft dus voor u beschikbaar wanneer u vragen heeft, of overleg wilt voeren over lopende zaken of de situatie rondom het coronavirus.

Heeft u vragen over de toepassing van de maatregelen die het kabinet heeft getroffen in uw specifieke situatie, of wilt u met ons in overleg treden over andere maatregelen die u zelf kunt treffen? Neem dan vrijblijvend contact met ons op door een e-mail te sturen naar:

• vragen van familiebedrijven/dga’s/stichtingen/verenigingen: Niels Meloen (niels.meloen@taxand.nl);
• vragen van multinationals/werkgevers: Thomas Dijksman (thomas.dijksman@taxand.nl);
• vragen over btw-verplichtingen: Richard Meerstra (richard.meerstra@taxand.nl).

Wilt u liever telefonisch contact?  Belt u ons dan via telefoonnummer: +31 (0)20 43 56 400 en u wordt verbonden met de juiste fiscaal expert.

Dit bericht wordt periodiek aangevuld met eventuele nieuwe steunmaatregelen of verdere verduidelijking van reeds getroffen maatregelen. Als u dit op prijs stelt, dan informeren wij graag direct per e-mail bij eventuele aanvullingen of verdere verduidelijkingen. Stuurt u hiervoor een e-mail naar Ellen Schut (ellen.schut@taxand.nl) en zij zal zorgen dat u in de mailinglijst wordt opgenomen.

In response to the spread of the Covid-19 virus, various business support measures have been put in place by many states. The purpose of this document is to present a brief summary of the measures announced per June 18^th by the public authorities in the affected countries.

Please view the whole document here.

Questions?

If you have any questions, please don’t hesitate to contact Maud Kallen.

In eerste instantie moest er voor de aanvraag van de NOW subsidie sprake zijn van een omzetdaling van ten minste 20% op concernniveau. Indien een concern als geheel minder dan 20% omzetverlies had, dan kon de NOW subsidie niet aangevraagd worden. De kabinet heeft nu een versoepeling aangekondigd waarbij de NOW subsidie toch aangevraagd kan worden door werkmaatschappijen die meer dan 20% omzetverlies hebben, maar behoren tot een concern dat als geheel niet aan de voorwaarde van meer dan 20% omzetverlies voldoet.

Om de versoepeling mogelijk te maken worden er een aantal extra voorwaarden gesteld:

• De werkmaatschappij moet een eigen rechtspersoonlijkheid hebben.
• Het concern moet verklaren over 2020 geen dividend of bonussen uit te keren of eigen aandelen terug te kopen tot en met de datum van de aandeelhoudersvergadering waarin de jaarrekening over 2020 wordt vastgesteld.
• De werkmaatschappij moet een overeenkomst met de betrokken vakbonden of de personeelsvertegenwoordiging hebben over werkbehoud bij de werkmaatschappij.
• Het concern mag geen gebruik maken van personeel-BV’s.
• Om te voorkomen dat niet geschoven gaat worden met omzet, personeel, interne doorbelastingen en voorraden gereed product ter maximalisatie van de NOW subsidie, zullen er aanvullende accountants controles moeten plaatsvinden.

Meer informatie?

Heeft u vragen of wilt u meer informatie, neemt u dan contact op met Sander Michaël of Annette van Scherpenzeel.

In order to develop a contemporaneous audit defense file, MNE’s must assess the potential impact and document as much as possible the transfer pricing positions taken during the pandemic. In this article we will provide an overview of the following attention areas: substance, permanent establishments, TP methods and benchmarks and agreements.

Substance

Accelerated by the BEPS project there is an increased focus on substance of companies. Due to the current travel bans and restrictions it is not always possible for board members to physically join board meetings. This may raise concerns about a potential change in the “place of effective management” of a company as a result of a relocation, or inability to travel, of chief executive officers or other senior executives. The OECD recently issued practical guidance on the tax consequences of the economic crisis titled ‘Secretariat Analysis of Tax Treaties and the Impact of the COVID-19 Crisis’. The OECD clarifies that it is unlikely that the crisis will create any changes to an entity’s residence status under a tax treaty. A temporary change in location of the board members and other senior executives is an extraordinary and temporary situation due to the crisis and such change of location should not trigger a change in residency, especially once the tie breaker rule contained in tax treaties is applied. Though taxpayers should still proceed with caution till the national governments have explicitly endorsed the OECD’s viewpoint. One needs to be aware, in the preparation of online board meetings, on its possible effect on the tax residency if this modus operandi progressively might not be considered incidental.

Permanent establishments and representatives

Another consequence of working from home could be triggering a foreign tax liability by having a permanent establishment (PE) or permanent representative (PR). One should be careful that the home office is not considered a PE. The guidance of the OECD on dealing with the economic crisis stated that this should not occur since a PE requires a certain degree of continuity and is not triggered by temporary measures in order to prevent an unnecessary fragmentation of the taxable income. The OECD further explicates that a home office should only be relevant if it is clear that the employer has requested the employee to constantly work from home (e.g., by not providing office space). A government intervention should not be viewed as such. Once again, one should await explicit confirmation by national governments of this viewpoint.

Transfer pricing methods and benchmarking

Many business models and international operating groups entail a single or centralized entrepreneur with low risk operating companies throughout the world, like toll manufacturers, limited risk distributors (LRD’s) and other intra group service providers. These subsidiaries with routine functions are normally considered the least complex entities and will therefore be the tested party in the benchmark analysis. In most cases these routine functions are expected to earn a relatively small but stable profit margin on a TNMM (Transactional Net Margin Method) or Cost Plus basis. Allocating losses to these routine functions is in normal circumstances highly unusual. However, this margin applies to regular business circumstances. Although LRD and toll manufacturer risks are limited, they still bear local market risks.

With regards to the transfer pricing method utilized, a distinction should be made between a TNMM, which is a net return on sales, costs or assets and categorically should not lead to a loss position, and the cost-plus method that is gross margin based. Groups suffering losses due to the pandemic should consider whether transfer pricing adjustments are required to ensure that these entities with routine functions continue to receive reasonable profits, while the principal could obtain the residual profits (or losses). Or potentially there are reasons for which the low risk entities can partly share in the losses of the group.

Since the arm’s length range is based on a comparison with historic third-party transactions, with completely different market conditions than the current economic conditions, it may be a reasonable approach to consider that the standard range does not completely reflect the current economic conditions. As a result, a lower point in the quartile range could be applied. This interquartile range of an arm’s length pricing is derived from benchmark analyses of comparable companies. Typically, this range is a three-years weighted average of the comparable profit margins. It may be necessary to rely on a single or multi-year range to adjust to the economic downturn.

Considering that the current intercompany transaction pricing may deviate from the interquartile range, it should be further discussed whether the losses of subsidiaries with routine functions, which are generated due to insufficient productivity and a slacking market demand resulting from a force majeure type of event, could trigger the termination of these intra group contracts. It could also be a reason to further update these agreements to make them more like third party contracts.

Therefore, it is essential for those companies impacted by these extraordinary circumstances, that the business impact is quantified and well documented to support the argumentation towards tax authorities of deviations between initial budgets and actual margins per entity. MNE’s should consider to amend their intercompany agreements as a consequence of the economic downturn, to support a deviation within or from the arm’s length range. This will the support the position to use a lower point in the companies’ current standard range.

The effect of government assistance

The OECD transfer pricing guidelines stipulates that there are some circumstances in which a taxpayer will consider that an arm’s length price should be adjusted to account for government interventions such as quarantines and travel bans, we currently face. As a general rule, these government interventions should be treated as conditions of the market and in the ordinary course they should be taken into account in evaluating the taxpayer’s transfer price in that market.

Various countries decided to support and subsidies companies during the pandemic crisis. It is clear from practical experience that, particularly in situations in which the cost-plus method is used for determining an arm’s length price, the question arises whether government assistance benefits should be deducted from the cost base. National tax administrations should clarify if and under what conditions, these specific emergency reimbursements can be deducted from the cost basis.

Transfer pricing documentation and APA’s

In these difficult times having in place robust and contemporaneous documentation to ensure that you have considered the local transfer pricing requirements is more important than ever. This provides the tax authorities with the necessary  information to conduct an audit and mitigates the tax risk of MNE’s.

The group should prepare corresponding transfer pricing documentation to explain which party should bear the losses or quantify the losses caused by the epidemic.

APA’s allow the taxpayer and tax authority advance certainty with respect to the at arm’s length prices to be applied. In the current crisis it is time to reconsider if the underlying assumptions still are met. Potentially the APA could be terminated if the assumptions are no longer met and not addressed. MNE’s that have entered advanced pricing agreements (APA’ s) should discuss with the local tax authorities if the impact of these extraordinary circumstances will lead to the agreement being invalidated or financials adjustments can be made in consultation with the tax authorities.

Reconsider financing structure

As a result of the pandemic outbreak MNE’s may be in more need of funds for the continuity of the business. The drastic changes in the market could trigger clauses in financing arrangements for collateral or the maximum level of debt to equity of the borrower. Companies may avail themselves to meet their financial obligations through (implicit) guarantees by the parent company. Under the new guidance on financial transactions, issued by the OECD in February 2020, it may be reasonable to renegotiate financial arrangements to more favorable terms, delay interest payments on a temporary basis, or re-characterize short-term loans as long-term loans.

As an immediate response companies that are facing difficult circumstances due to the pandemic should reconsider their intercompany financing through the following:

• Re-examine financing structure to ensure the entities are properly capitalized, given revised budgets;
• Consider conversion of debt into equity or re-financing. Refinancing may be a good idea in the event a quick turnaround is expected, as favorable (assuming credit rating deterioration) interest deduction will be available once profits will be back.

Practical way forward

A lot is coming to taxpayers and transfer pricing may not be the top priority at this time. However, the choices you make today have an impact in the future and can be questioned. Therefore, these choices need to be carefully considered and documented. Taxpayers should anticipate and review their transfer pricing models, if needed amend intercompany agreements and substantiate the positions taken and amendments implemented through proper documentation.

Tax authorities will focus on reviewing transfer pricing policies and outcomes for historical tax years affected by the Corona pandemic and try to distinguish between the economic effects of the pandemic versus normal market risk as a result of business conduct. As stressed above, MNE’s should document how and the extent to which business is distorted due to the pandemic outbreak and how impacted the profitability of group companies.

A transfer pricing analysis should be made substantiating why certain group companies might end up with a profitability lower than expected and the impact of changes in intercompany financing to improve cashflow. Past benchmark studies based on financials of past years are likely not appropriate.

With regards to PE risks we do not expect an immediate risk given that incidental working from home or travel restrictions of the workforce should not lead to a PE.

More information?

If you would like more information, please contact Jimmie van der Zwaan or Berend van Holthuijsen.