Intra Group Tax Avoidance Under Scrutiny From Netherlands Tax Authority

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14.10An amendment to the Government’s Tax plan has been proposed from Frans Weakers, the Dutch Financial State Secretary. The amendment proposes, extending existing tax legislation to provide that all companies who engage in the payment and collection of interest and royalties (within a group context) are now obliged to inform the government of their existence and size. Failure from companies to comply to the proposed amendment will result in hefty fines. The proposed amendment is part of many recommendations from the government to combat international tax planning. Currently, tax law in Netherlands allows intermediary companies whose business activities extend in receiving interest or royalty payments from other countries and follow on the chain in paying the same monies to third countries must inform the Dutch Tax Authorities of their existence and size, if they want the approval of advanced certainty on tax treatment. The requirements state that such companies must conduct their business with an amount of capital that is adequate with the functions and risks the company undertakes. In order to combat the unintended use of Dutch tax treaties and Dutch legislation, the proposed amendments will extend to include those companies that do not request advanced certainty. Finally, the Tax Authorities has also pledged to inform treaty partner states when an entity fails to meet the Dutch tax requirements.