Transfer pricing in the Netherlands: These are the requirements

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Frequently asked questions about transfer pricing – Part I

What is transfer pricing?

Transfer pricing refers to the pricing of inter-firm transactions between related parties. Due to the relationship between entity members of a group (groepsmaatschappijen), it may arise that there are special conditions established when making certain arrangements for goods or services, however, transfer pricing effectively eliminates the application of any special conditions with regards to inter-firm transactions between related parties and ensures that entities are transacting as independent parties in an open market would. This is referred to as the arm’s length principle which treats group members as separate entities and allows profits (and thus, taxation) to be fairly attributed to the relevant jurisdictions.

Transfer pricing and the Dutch regulations

The arm’s length principle, although implicitly part of Dutch tax law for a long time, was codified in the Netherlands in the year 2002 by Article 8b of the Corporate Income Tax Act 1969 (“CITA”). It was through a 2001 regulation that the relation between the OECD Transfer Pricing Guidelines and Dutch transfer pricing was clarified. This regulation was updated via the Government Gazette 26874, published on the 22^nd of April 2018, (“GG-26784”). GG-26874 named the Organisation for Economic Co-operation and Development Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, published in Paris 2017 (“OECD Guidelines”) an appropriate interpretation and clarification of the principle set out in Article 8b of the CITA. GG-26874 was replaced by GG-16685, published 1 July 2022, which is largely reflective of the principles published in the 2022 version of the OECD Guidelines.

Domestic applicability

The OECD Guidelines were written with the intention of capturing the principles applicable to cross-border pricing arrangements between related parties, however, paragraph 10(2) of the GG-16685 requires that both national and cross-border transaction arrangements with affiliated entities are to be documented and justified.

What are the Dutch requirements around transfer pricing?

Section 29b-h of the CITA specifies that the documentation requirements for taxpayers who meet certain standards are a Local File, a Master File, and relevant Country by Country Reporting.

These have been summarised in the table below:

Documentation	Description of documentation	Threshold to prepare / file	Filing Requirement / Timelines	Entity responsible for preparing / filing	Applicable penalties
Local File	Documentation relating specifically to the material-controlled transactions of the local taxpayer. There are certain requirements that need to be met to ensure this documentation can be considered compliant.	Entities whereby the consolidated group income is at least 50 million EUR.	Required to be prepared along with the submission of the Corporate Income Tax (“CIT”) return.	The local entity	Between 515 EUR and 25 750 EUR.
Master File	Documentation containing standardised information relevant for all Group entity members. There are certain requirements that need to be met to ensure this documentation can be considered compliant.	Entities whereby the consolidated group income is at least 50 million EUR.	Required to be prepared along with the submission of the CIT return.	Ultimate Parent Entity or Surrogate Parent Entity (“UPE” or “SPE”).	Between 515 EUR and 25 750 EUR.
Country by Country Reporting (“CbC”)	The CbC contains information related to the global allocation of the Group’s income and taxes paid together with certain indicators of the location of economic activities within the Group.	Groups with consolidated revenues of 750 million EUR.	Filed no later than 12 months after the last day of the reporting year.	UPE/SPE	Between 515 EUR and 25 750 EUR.
CbC Notification	In the instance where the UPE/SPE is not considered to be tax resident in the Netherlands, the local entity is required to inform the tax inspector of specific details regarding the UPE/SPE who will be responsible for reporting the CbC.	Groups with consolidated revenues of 750 million EUR.	Informed by the last day of the reporting year of that Group.	The local entity	Between 515 EUR and 25 750 EUR.

Important to note: If the total consolidated group turnover is below EUR 50 million annually, a Master File or Local File is not required to be prepared, but it still is obliged to have transfer pricing documentation in your files that demonstrate that the arrangements between the group companies meet the arm’s length principle.

Crowe Peak’s transfer pricing services

Transfer pricing is a highly specialized field. Hence, if your company’s group requires guidance on transfer pricing matters, it is recommended to seek specialized expertise in this area. Crowe Peak’s tax advisors remain abreast of the latest developments in transfer pricing. Would you be interested in scheduling an informal meeting? Please feel free to get in touch with us. Crowe Peak will also be delving deeper into various topics relating to transfer pricing in the coming articles, be sure to follow along to help supplement your understanding of transfer pricing.