In the Netherlands the possibility has always existed to discuss important tax issues with the tax authorities in advance. This is true for each tax inspectorate in the Netherlands but for a number of subjects, the Dutch Revenue Service operates so-called Advance Tax Ruling (ATR) and Advance Pricing Agreement (APA) teams in the Rotterdam corporate income tax inspectorate. We have filed a large number of advance ATR and APA ruling requests with this authority over the last 30 years and are therefore quite familar with the process.
The issuance of advance tax rulings has been centralised by the Dutch Revenue Service in the Rotterdam inspectorate for Large Enterprises, to avoid each tax inspectorate having to free up time and expertise to discuss and agree on tax subjects with a major financial impact. The Ruling Teams employ a number of tax inspectors who are highly specialised in certain aspects of Dutch (international) tax law including the relevant provisions in tax treaties. Centralisation also means unification. Advance tax rulings (ATR’s) these days are to a large extent standardised. Non-standard rulings must be published by the Ministry of Finance albeit in anonimised format, which implies that deviations from the standard types of rulings is difficult, to say the least.
Nonetheless, when changes are made to the Corporation Tax Act, new ruling possibilities will occur and old ones will cease to exist. Obtaining ATR’s and APA’s is therefore always a dynamic exercise.
The Ruling Team is under no obligation to actually issue an ATR or APA. They have full liberty to not agree to any tax analysis made by a tax adviser on which he bases his ATR or APA request. The Ruling Team may also decide that although they do not find fault with the tax analysis, to refuse issuing an ATR if they believe that granting one might upset the tax authorities of other countries and might cause drawbacks to the willingness of other countrries to enter into tax treaties with the Netherlands or into treaty renegotiations. The Ruling Team may also decide that an ATR request was made ”to test the boundaries of tax law”, cases which they do not want to bless with advance certainty for the tax payer.
ATR’s are (just) interpretations of Dutch corporation tax law and do not in any way intend to offer tax privileges to anyone. Their purposes is to take away uncertainty in tax areas where no or little case law exists, in new areas (after changes to tax legislation) and in areas where certain income must be reported within a certain range (usually in the area of transfer pricing; Rulings in that area are called APA’s and are handled by a special division of the ruling team) .
Lastly, the Ruling Team may decide to send a copy of the ATR to the competent tax authorities of other countries involved, to avoid misrepresentation abroad of the actual Dutch tax agreement.
The Ruling Team is the competent authority for Advance Tax Rulings regarding:
* the applicability of the so-called Participation Exemption to subsidiaries of Dutch entities in group structures
* the Dutch tax aspects of so-called hybrid loans
* the Dutch tax aspects of so-called hybrid partnerships
* the appplicability of informal capital contributions (tax deductible expenses which are not actually incurred by the tax payer)
* compliance with the Dutch ”beneficial ownership” rules for interest- or royalty conduit entities
* transfer pricing issues of whatever kind
It is not unusual to combine certain key tax features into one ruling request. Our proprietary ”notional interest deduction” involves the participation exemption, hybrid loans and a hybrid partnership, all in one go. We have been in constant contact with the ATR team since March 1984, on a large variety of subjects, so we know which advance tax rulings they are prepared and allowed by the Ministry of Finance to sign off on and which ones not. This changes rather frequently, also because of pressure from ”Brussels” and the OECD. The OECD BEPS programme has already caused a new wave in ruling-land: ATR and APA rulings, today, are only issued if the structure brings ”substance” to the Dutch economy. SPV companies without real employees and without ral economic functions will be denied any ATR or APA, regardless of their legal attributes. We structure our tax products around this experience, noting again that ATR’s and APA’s are only necessary in structures that employ related party dealings.