Summary of international and Dutch tax developments in 2017
2017 was a year in which the international tax climate continued to change rapidly: the OECD persisted in its efforts to tackle tax avoidance, the European Commission opened state aid investigations into the tax treatment of Apple in Ireland and IKEA in the Netherlands, and some key jurisdictions introduced or proposed significant tax legislation, thereby affecting all multinational enterprises having arrangements in these jurisdictions. It was also a year of major political change, with elections in Italy, Netherlands, the UK, Germany and France, and a new president in the USA. In blog 9, we have discussed the implications of the new legislation introduced by the Dutch government as of 1 January 2018. In addition, the new government announced some of its tax plans for the coming years, which means that we expect even more changes for the Dutch budget in autumn. In this blog, we will look back at tax year 2017 and review the changes that have an impact on businesses / multinational companies in the Netherlands. It should be noted that we have focused on the relevant items that on a day-to-day base affect our clients.
28 Feb. '18 Patrick T.F. Schrievers
Anti-Tax Avoidance Directive
In line with other EU Member States, the previous Dutch government published its proposed implementation of the EU Anti-Tax Avoidance Directive (“ATAD”) for public consultation. The final proposal is expected to be published in the next few months. It is likely that implementation of the ATAD will affect interest deduction limitation rules. In this respect we expect that the Netherlands will implement similar interest limitation rules as in Germany: the interest expenses that exceed the interest income (net interest expenses) are generally only tax deductible up to 30% of the current year’s taxable EBITDA. It is uncertain to what extent the Netherlands will implement controlled foreign companies / “CFC” legislation.
More than 70 countries, including the Netherlands, signed a multilateral instrument (“MLI”) in an effort to close the gaps in existing international tax rules by transposing results from the Base Erosion and Profit Shifting (“BEPS”) project into bilateral tax treaties worldwide. The MLI implements among others (i) minimum standards to counter treaty abuse, (ii) a new definition of permanent establishments (see also blog 6 on the Dell case) and (iii) mandatory binding arbitrage rules to improve dispute resolution mechanisms.