Category

Tax

Documentation requirement in relation to ATAD 2

By Legal, Tax

The Dutch implementation of the EU Anti-Tax Avoidance Directive 2 (“ATAD 2”) came into effect on 1 January 2020 for tax years starting on or after that date. ATAD 2 aims to neutralize hybrid mismatches resulting in situations with a double deduction or a deduction without inclusion. The Dutch tax law in relation to ATAD 2 includes a documentation requirement which means that in case a taxpayer checks the box in his corporate income tax return that the Dutch ATAD 2 provisions are not applicable, the administration of the taxpayer should include in its administration all information that substantiates the non-applicability of the hybrid mismatch rules. If the taxpayer does not have information on the non-applicability of the hybrid mismatch rules in its administration, the tax inspector could request the taxpayer to substantiate this, which may result in a shifting of the burden of proof.

Therefore, it is really important to determine the impact of ATAD 2 for Dutch corporate taxpayers. In case you have any questions or need assistance with assessing whether the hybrid mismatch rules would affect your business or clients, please reach out KC Legal.

Update on Russian – Dutch Tax Agreement

By News, Tax

The most salient topic of today’s agenda is related to the approval of the Russian government of the law of denunciation of the Russian-Dutch tax treaty which has been recently submitted to the Russian State Duma.

Despite the effort of the European business in Russia and the Russian business community to influence the decision of the Russian Ministry of Finance to continue negotiations of treaty, it has been denied.

Next to it, as soon as the the statement will be approved by the Russian Duma, the Federation Counsel and the President, respectively, a notice of termination will be presented to the Netherlands.

However, the there is possibility for a process to be delayed or terminated by the Russian parliament. Though, there is a very little chance that this law won’t be approved. If submitted before July 1st 2021, the treaty can be terminated from January 1st, 2022. Therefore, it is the right time to think about the consequences of the termination and be prepared for the possibility of termination.

An anti-tax-avoidance bill introduced by the Dutch government

By News, Tax

The Dutch government has recently submitted an anti-tax-avoidance bill that would introduce a withholding tax on dividends paid to companies in low-tax jurisdictions.

The tax would go into effect January 1, 2024. The additional withholding tax would further the Dutch governments objective of curbing tax avoidance. Under the proposal, the tax would apply to dividends paid to companies in countries with a corporate tax rate below 9 percent, including the 12 countries on the EU blacklist, regardless of whether they have a tax treaty tax agreement in force with the Netherlands. The withholding tax proposal is part of the Netherlands’ bid to shed its reputation as a tax haven.

For more information on the proposed amendments contact Ceriel Coppus.

Understanding the taxation of IP

By Tax

The Virtual Series publications from IR Global bring together a number of the network’s members to discuss a different practice area-related topic. The participants share their expertise and offer a unique perspective from the jurisdiction they operate in.

In the following document, you will hear from seven experts in IP taxation. They will offer insight specific to their own jurisdiction, on the most efficient methods of tax structuring with regard to IP, highlighting any potential challenges and opportunities IP owners might want to be aware of when operating in their country.

IR Global – Meet the Members

By Legal, Tax

The Netherlands is one of Europe’s most compelling investment opportunities, despite not being the first name on every CEO’s mind when considering international expansion. Large city regions in countries, such as the UK, France or Germany, can often have more allure as gateways into Europe, but any decision maker who fails to look beyond this established order is making a mistake. A cursory look at the credentials of The Netherlands as an investment destination, immediately shows its vast potential.

 

Download full document here: IR Global – Meet the Members – Netherlands

IR Global Tax Virtual Series 2018

By News, Tax

Tax Efficient Inbound Investment – Tax Structures for Cross-Border Acquisitions.

Anyone considering an inbound investment into another country or jurisdiction must give serious thought to taxation. Issues such as privacy, accurate asset valuation and liability protection are important, but it is the tax efficiency of a foreign investment that will most likely measure its long-term success.

There are, of course, many different types and methods of investment, whether that be via direct acquisition of a capital asset, the purchase of shares in an existing business or a real estate transaction. A smart investor will study the rules and regulations that apply to each scenario in their jurisdiction of choice, and adhere to them while minimising tax liability.

Investment by cross-border merger or acquisition is one area that has received much publicity recently, as the Organisation for Economic Co-operation and Development (OECD) works to redress certain tax-efficient structures legitimately used by smart corporates. It’s Base Erosion and Profit Shifting (BEPS) legislation is designed to address the practice of shifting profits and assets across borders to minimise overall global taxation.

This drive to halt BEPS has affected various tax reduction techniques, including patent box regimes, interest deductibility and offshore structures (via business substance tests). Buyers may also have contingent tax liabilities due to BEPS exposure under the seller’s aegis.

Where smaller investments are concerned, the rules are no less complex, as we will learn in the following discussion. For countries like the USA, which receives significant inward investment, there are withholding taxes for foreign investors on the sale of assets and the receipt of ‘soft’ income, as well as death taxes and individual state taxes to consider.

In Italy, on top of corporation tax of 24 per cent, there is a regional tax on productive activities of 4.82 per cent, which many investors will not be aware of. Employing an experienced tax advisor in the jurisdiction to be invested in, is crucial before any other decisions are made. They will help investors to decide which vehicles are best to hold assets and which jurisdictions have the most favourable tax treaties to eradicate or reduce withholding tax. The advisor will also be able to ‘read between the lines’ of complex tax legislation, structuring transactions that are tax efficient and also tax compliant.

Examples include the concept of Fiscal Unity discussed here by Friggo Kraaijeveld in The Netherlands, the use of the European Union’s Parent Subsidiary Directive (PSD) to reduce withholding tax, as explained by Tommaso Fonti in Italy, or the Portfolio Interest Exemption, employed in the USA by Jacob Stein.

They will also have details of any tax incentives offered by various governments to attract inbound investment and be able to guide investors in the customs and culture of tax authorities that may be very different from those they are used to.

The following pages contain advice and guidance from five of IR Global’s tax experts and should provide an interesting insight into the many and varied tax-orientated challenges faced in pursuit of profitable foreign investment.

Download full document here: IR Global Tax Virtual Series 2018 – Tax Efficient Inbound Investment

European Union Adopts Black List of 17 jurisdictions

By Legal, Tax

On 5 December 2017, European Union (EU) finance ministers adopted a list of “non-cooperative jurisdictions for tax purposes” also known as  ‘The Black List’. The list is part of the EU’s work to counter worldwide tax evasion and avoidance. According to the EU, it will help the EU to deal more robustly with external threats to Member States’ tax bases and to tackle third countries that consistently refuse to play fair on tax matters. The list should create a positive incentive for international jurisdictions to improve their tax systems where there are deficiencies in their transparency and fair tax standards. No EU member states fall into the list because it should be recognized as a tool to deal with external threats to Member States’ tax bases.

The list is based on three screening criteria’s: tax transparency, fair taxation (no harmful tax regimes) and implementation of BEPS minimum standards. The Black List consists of 17 countries which failed to meet agreed tax good governance standards. The following jurisdictions appear on the EU Black List: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea, Macao the Marshal Islands, Mongolia, Namibia, Palau, Panama, Santa Lucia, Samoa Trinidad Tobago, Tunisia, and United Arab Emirates.

In addition to the Black List, the EU finance ministers also adopted a “Grey List”. The “Grey List” includes entities which have committed to addressing deficiencies in their tax systems and to meet the required criteria and following contacts with the EU by the year-end 2018 (or in the case of developing countries by the year-end 2019). As those jurisdictions are not blacklisted, they would not fall within any of the sanctions discussed below. The Grey List includes 47 countries, among others, EU candidates Turkey, Serbia and Montenegro, as well as Switzerland, Bosnia and Herzegovina, Macedonia, Morocco, Thailand, Vietnam and Hong Kong.

Sanctions

The jurisdictions on the final Black List may face sanctions (‘defensive measures’) imposed by the Member States in the form of (administrative) tax measures and by the EU in the form of non-tax measures.

The non-tax measures are linked to EU funding in the context of the European Fund for Sustainable Development (EFSD), the European Fund for Strategic Investment (EFSI) and the External Lending Mandate (ELM). Funds from these instruments cannot be channeled through entities in listed jurisdictions.

The European Commission recommends (not mandatory!) Member States to take tax sanctions against the EU Black Listed jurisdictions. The following defensive tax measures of legislative nature could be applied by the Member States: non-deductibility of costs, CFC rules, withholding taxes, limitation on participation exemption, switch-over rules, reversal of the burden of proof, special documentation requirements and mandatory disclosure by tax intermediaries of specific tax schemes with respect to cross-border arrangements. The European Commission does not provide any guidance on when the Member States should take the recommended sanctions.  If a Member State takes such measures, not only its domestic law but – depending on the measure – also bilateral tax treaties might have to be changed.

The Black List will be updated at least once a year. This update will be based on the continuous monitoring of Black Listed jurisdictions, as well as those that have made commitments to improve their tax systems (Grey Listed jurisdictions).

 

Dutch Fiscal Unity Emergency Remedial Measures

By Tax

On October 25 2017 the Advocate General (“AG”) at the Court of Justice of the European Union (CJEU) published his opinion on the preliminary ruling request of the Dutch Supreme Court in two corporate income tax cases concerning the applicability of the so-called ‘per-element’ approach in the Dutch tax consolidation regime (“fiscal unity”). The common key issue is whether taxpayers are eligible for benefits from separate elements of the fiscal unity regime as if a fiscal unity with foreign subsidiaries can be entered into, despite the fact it’s not possible to enter into a fiscal unity with non-EU established subsidiaries. This occurs in situations concerning the Dutch interest deduction limitation rule to prevent base erosion and the non-deductibility of currency losses on a participation in a non-Dutch/EU subsidiary.

In general the AG is of the opinion that the ‘per-element approach’ adopted by the CJEU in the Groupe Steria judgment is also applicable in the Dutch tax consolidation regime (“fiscal unity”). The AG considers that the application of the interest deduction limitation is contrary to the EU freedom of establishment.

If this approach is enshrined in the Court’s decision, this could have a major impact on the Dutch tax consolidation regime. According to the Dutch Government, a negative decision from the CJEU is expected to cause artificial erosion of the tax base of Dutch corporate income tax. Hence, the Dutch Government announced emergency remedial measures in case the CJEU follows the negative conclusion of the AG in the case on interest deduction limitations to prevent base erosion. These emergency remedial measures will have retroactive effect as from 25 October 2017, 11:00 am. If the so-called per-element approach should be applied, some advantages of the fiscal unity (for example the non-application of the anti-abuse rule in art. 10a of the Dutch Corporate Income Tax Act) would no longer be available in domestic situations by treating a fiscal unity in domestic situations in the same way as in a comparable EU situation (in which the advantages are also not available). As a consequence, several laws in the CIT and the DWT will be applied as if ‘no fiscal unity exists’. The infringement with the right of establishment caused by the Dutch fiscal unity regime would in such manner be eliminated for the future. In addition, the Dutch government announced that the Dutch fiscal unity regime will, within a foreseeable period, be replaced by a company tax group regime that is future-proof.