The following translation was not made by us, but was taken from the website of the Dutch Ministry of Finance - Dutchtax.net
The State Secretary for Finance has decreed as follows.
The Decree of 21 July 1995 (No. AFZ94/4519M) on fiscal implementation policy, standpoint provisions and appeals policy (as amended by the Decree of 26 January 1997 (No. AFZ94/4609M) sets out the rules for the provision of advance certainty by the tax administration. This decree provides a further explanation of those situations in which advance certainty will not be provided.
In his letter to parliament of 17 February 1995 (No. DB96/716M), the State Secretary for Finance made the following remarks about the conditions under which advance certainty may be issued: “No rulings can be issued in cases of abuse of law or where such an action could constitute a breach of good faith between treaty partners”. Under the Decree Transfer prices, the application of the arm's length principle and the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines) of 30 March 2001 (No. IFZ2001/295M), the policy as published in the above mentioned letter was withdrawn. The present decree makes it clear that, in the future, the government will continue to pursue a policy based on the principle that no advance certainty will be granted if this is in breach of good faith between treaty partners and/or of general international interests.
No advance certainty will be granted if this is in breach of good faith between treaty partners and/or of general international interests.
This means, for example, that the requested advance certainty will not be granted if the tax inspector suspects that doing so would be detrimental to the interests of a treaty partner or to another international interest.
A strong indication that providing advance certainty would be contrary to good faith between treaty partners arises if one or more aspects that are inherent in the proposed structures and/or to all of the various transactions related to the application for advance certainty would be contested if they occurred in the Netherlands (i.e. if the applicant is patently testing the limits of fiscal regulations). This strong indication that providing advance certainty would be contrary to good faith between treaty partners can be removed by imposing supplementary conditions on such advance certainty. In this respect the applicant may be asked to demonstrate that the treaty country or countries which are to be confronted with the aspects in question is or are aware of the overall structure and the series of connected transactions for which the advance certainty is requested in the Netherlands. An example of a situation in which it is possible to remove a suspicion that the provision of advance certainty would be contrary to good faith between treaty partners, is where a professional sportsman who is not resident in the Netherlands applies for advance certainty for the tax implications of a number of related transactions that have the effect of transferring the (legal and/or economic) interests of the sportsman's right to his name and image to an entity that is taxed at a rate which would not be considered as being reasonable by Dutch standards. There is a real risk in this situation that the tax base would be eroded either in the country in which the sportsman has built up his name and image or in the country in which the sportsman is a resident. For this reason, advance certainty will be provided in such cases only if the applicant is able to demonstrate that the tax administration in the country in which the sportsman has built up his name and image and/or in the country in which the sportsman is a resident is aware of the series of related transactions.
I have included other examples of situations which would be detrimental to the interests of a treaty partner inter alia in the Decree Entities providing intra-group financial services without a real economic presence in the Netherlands; no advance certainty, exchange of information and limited opportunities for crediting withholding tax (the Decree of 30 March 2001 (No. IFZ2001/294M), Paragraph 2).
An example of a situation that is contrary to general international interests is where goods are invoiced with the aim of concealing their origin and thereby evading an international boycott.
As a final point, no advance certainty is given, of course, if the tax inspector suspects that the information disclosed to the relevant foreign authorities is either inaccurate or inconsistent.
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Last reviewed 12 August 2004