DLA Piper Netherlands

The Dutch State Secretary of Finance sent a letter to the Dutch Parliament on February 26 2019, answering questions raised by members of the House of Representatives on the proposed changes to the Dutch tax ruling practice, and announced introduction of a conditional withholding tax (WHT) on intra-group, outbound interest and royalty payments.

One of the key benefits of the Dutch tax system is the participation exemption regime, whereby benefits derived by Dutch corporate taxpayers from a qualifying shareholding (i.e. dividends, capital gains, and foreign exchange results) are fully exempt from Dutch corporate income tax (25%). This beneficial treatment of the participation exemption regime also applies to earn-out payments whereby the deferred instalment payments depend upon the performance of the company being sold.

Rachit Agarwal and Jian-Cheng Ku of DLA Piper discuss the transfer pricing (TP) aspects of a business restructuring within a multinational enterprise (MNE) group, through reference to a recent high-stakes Dutch court case. The case highlights the importance of TP documentation as evidence in tax litigation and in conducting an appropriate TP valuation.