Allocation of burden of proof under Dutch law
In the Netherlands, under Article 8b of the Corporate Income Tax Act (Wet op de vennootschapsbelasting 1969: CITA) the Dutch Tax Authorities (DTA) bears the initial burden of making it plausible (aannemelijk maken), on the basis of facts and circumstances, that the transfer price agreed between related parties deviates from what independent parties would have agreed under comparable conditions. So, the initial burden of proof is on the DTA. Any resulting advantage or disadvantage is presumed to be caused by the affiliation between the parties. This presumption, however, is rebuttable.
Observing the case, we question whether the facts presented by the CZT are sufficient to make it plausible (aannemelijk maken) that the transfer price agreed between Inventec CZ and Inventec TW deviates from the price that independent parties would have agreed upon under comparable circumstances. The CZT argued that independent entities which both hold title to inventories and perform production activities typically earn a return on their total costs (including materials), rather than solely on their operating expenses. However, to substantiate such a position, the CZT would be expected to provide supporting evidence from comparable independent third-party data, such as financial statements, contractual terms, or other relevant documentation.
The CZT could also refer to its quantified allocation of risks between Inventec CZ and Inventec TW and its adjustment of the ROTC base (to 24.62% of the initial level) as factual support for its position that the transfer price was not at arm’s length.
