Dutch State Secretary of Finance informs Parliament on ruling practice
Early February 2015, the Dutch State Secretary of Finance sent a letter to the Parliament to provide insight and explanation on the Dutch advance pricing agreements (APA) and the advance tax rulings (ATR) practice. The purpose of this letter is to provide as much transparency on the Dutch ruling practice as possible, without harming the position of taxpayers.
The Dutch State Secretary of Finance explains that the Dutch Tax Authorities may offer certainty in advance to national and international operating companies and individuals within in the boundaries of domestic tax law. He emphasizes that the (interpretation of) tax legislation applied when issuing an APA or ATR equally applies to a taxpayer that did not ask for certainty in advance. Therefore, the added value of obtaining an APA or an ATR is that it provides certainty upfront and not a fiscal favor that is not available for those who decide not to obtain a ruling.
The State Secretary also mentions that both the Netherlands Court of Audit and the European Commission have confirmed that the Dutch APA and ATR practice provides for a solid and transparent implementation of the Dutch laws and regulations. According to the Dutch State Secretary, the investigation by the European Commission on a specific APA does not affect the positive assessment of the organization and robustness of the Dutch ruling practice as a whole.
A ruling in general would be only binding for the Dutch Tax Authorities and cannot bind other states or provide certainty on foreign taxation. The Dutch State Secretary is of the opinion that potential issues caused by for example mismatches in the qualification of an item of income or instrument between countries are not a result of granted APA’s or ATR’s, but are caused by mismatches between the legal systems of the countries involved and insufficient exchange of information between countries. According to the Dutch State Secretary the solution should be found in measures at an international level instead of unilateral measures at a national level.
According to the Dutch State Secretary, the Netherlands is taking a leading role in the exchange of information with other tax authorities. For example, specific agreements on the exchange of information about rulings are in process with Germany and these agreements will soon be laid down in a Memorandum of Understanding. The agreement about the exchange of information concerning rulings with Germany can be seen as a precursor to agreements with the tax authorities of other countries.
This letter underlines the support for the Dutch APA and ATR practice as key driver of the Dutch tax climate and reflects the confidence of the Dutch Government in the solid and robust Dutch ruling practice.