Towards greater tax transparency
On 31 August, 2016 the Dutch State Secretary for Finance submitted a Bill to the House of Representatives of the Netherlands for implementation of Council Directive 2015/2376/EU2 (Directive) into the Dutch tax law as of 1 January 2017. The Directive concerns the mandatory automatic exchange of information on cross-border advance tax rulings (ATR) and advance transfer pricing agreements (APA) and amends Directive 2011/16/EU on administrative cooperation in the Union. The Bill proposes to implement the Directive in the Dutch Tax Act on International Assistance in Collecting Taxes (WIB).
The Directive is part of an ambitious and comprehensive package for more administrative cooperation and fiscal transparency in the field of taxation within the Union, particularly regarding cross-border tax rulings. The pre-amble of the Directive express it as follows: “(…) rulings concerning tax-driven structures have, in certain cases, led to a low level of taxation of artificially high amounts of income in the country issuing, amending or renewing the advance ruling and left artificially low amounts of income to be taxed in any other countries involved. An increase in transparency is therefore urgently required”.
The European internal market already has rules in place to facilitate a spontaneous exchange of tax information between Member States. However the efficient spontaneous exchange of this information is hindered by practical difficulties such as the discretion of individual Member States to decide whether or not to exchange information with another Member State. Therefore the Directive provides for more clearer and more precise rules and definitions to establish a wider scope of administrative cooperation and exchange of information between Member States. Among others an ample definition is provided for ATR and APA. The scope of the definitions is set sufficiently broad to cover a wide range of situations.
The automatic exchange of information will consist of two steps. First, individual Member States are required to exchange information with other Member States on cross-border tax rulings (without discretion), on a regular interval. Next if so required, a Member State may request additional information from the original Member State based on the already existing rules on administrative cooperation and exchange of information upon request. The WIB already provides for such an exchange of information upon request so no further amendment of the WIB is required in this respect.
The Dutch Bill contains a list of criteria to determine whether there is a cross-border ATR/APA subject to a mandatory automatic exchange of information between Member States. A cross-border ATR/APA is any statement, agreement, notice or any other instrument or any other act with similar effect, issued by a tax authority concerning: a) the interpretation or application of a national tax law; b) upon which that person may rely; c) relating to a cross-border transaction, or activity that results into a foreign permanent establishment; and d) has been issued prior to the transaction or act that led to a permanent establishment or, alternatively, prior to the filing of a tax return for the period under which the transaction or series of transactions or activities took place in another jurisdiction.
The range of statements that falls within the definition of an ATR or APA, is rather broad. However the scope is always on cross-border tax rulings in the context of the Dutch corporate income tax and Dutch dividend withholding tax.
The information to be communicated under the Bill includes the following:
- The identification of the person (other than a natural person) or group of persons to whom it belongs;
- A summary of the content of the ATR/APA;
- The dates of issuance, amendment or renewal;
- The start date of the period of validity of the ATR/APA , if specified;
- The end date of idem, if specified;
- The type of APA/ATR;
- The amount of the transaction or series of transactions, if specified;
- In case of an APA: a description of the set of criteria and method used for determination of the transfer pricing;
- The identification of the other Member States likely to be concerned by the ATR/APA (if any);
- The identification of any person, other than a natural person, in the other Member States, if any, likely to be affected by the ATR/APA; and
- An indication whether the information is based on an ATR or APA or (in appropriate cases) to the request that the APA was based.
Single standard form
The information will be communicated by means of a single standard form through use of a secured electronic mail. Initially this should take place as much as possible through the specially developed secured CCN network. Practical arrangements necessary for the establishment of a central electronic database, accessible to tax authorities of Member States will be effected before 1 January, 2018 so that from then on Member States could upload the information to this database. This database will be consulted to all tax authorities of the Member States and the EC. A number of specific information will however not be accessible to the EC. This relates in particular to information that could be used by the EC for other purposes than the assessment of the effectiveness of the exchange of information on tax rulings, such as State-Aid examinations, information about the description of the criteria under a transfer price agreement used for purpose of determination of transfer prices and or the transfer pricing method applied.
The provision of information should not lead to the disclosure of a commercial, industrial or professional secret or of a commercial process, or disclosure of information which would contrary to public policy.
The exchange of information with other countries in the context of the Action Plan on Base Erosion and Profit Shifting of the OECD is already provided for based on the Convention on Mutual Administrative Assistance in Tax Matters, bilateral Tax Treaties or a Tax Information Exchange Agreement (TIEA). Such exchange does not require therefore implementation in national legislation at this stage; the WIB already provides a basis therefore.
For rulings issued, amended or renewed after December 31, 2016, information will be exchanged twice a year, within three months of issuance, amendment or renewal of the tax ruling.
ATR and APA’s agreed, modified or renewed in the five-years period before January 1, 2017, will be exchanged no later than January 1, 2018.
An exemption applies for tax rulings concluded between 1 January, 2012 and 1 January, 2014 and which were no longer valid after January 1, 2014. Those need not to be exchanged.
Tax rulings concluded by small and medium persons before April 1, 2016 are also exempt from mandatory automatic exchange of information provided the group-wide annual turnover of the person or the group in the fiscal year preceding the date of issuance, amendment or renewal of the tax ruling is less than € 40 million. This exemption is not available to persons conducting mainly financial or investment activities. Natural persons are furthermore excluded from the scope of exchange of information of the Bill.
Should you like to discuss the above further or require more information, please feel free to contact me.
The information regarding this Bill can be found here: