The Netherlands in International Tax Planning Second revised edition. Table of contents

Transcription

1 The Netherlands in International Tax Planning Second revised edition Table of contents Chapter 1: General introduction 1.1. What this book is and what it is not 1.2. Tone 1.3. EU law 1.4. Substantial amended corporate income tax in 2007 Chapter 2: How this book is organised Chapter 3: Introduction to Dutch tax 3.1. National taxation only, no state tax 3.2. Ministerial decrees and case law 3.3. National law vs. tax treaties and EU law 3.4. Classical system 3.5. What are taxpayers taxed for 3.6. Resident taxpayers 3.7. Non-resident taxpayers 3.8. Dividend withholding tax 3.9. Limitation of double taxation at corporate level Participation exemption Loss compensation Tax consolidation How are they taxed? Tax returns Tax assessments Audits Chapter 4: Corporate income tax subjects 4.1. Residence Case law on residence 4.2. Residents Special taxable entities Mutual investment funds Taxable limited partnerships (also called open limited partnerships ) Pension funds Taxable object for resident taxpayers Case law on business related costs Ending resident tax status Case law: Realisation of profits in sight of emigration Are exit taxes EU compliant? 4.3. Non-residents

2 Special purpose funds Taxable object for non-resident taxpayers 4.4. Tax transparent, taxable entities Dutch hybrid entities Case law Classification of foreign entities Decree on inbound investment Decree on outbound investments Chapter 5: Financing a taxpayer 5.1. Equity 5.2. Debt Decree on expired debts 5.3. Hybrid loans Introduction A word on hybrid loans, profit dependent loans and profit sharing loans Legislation on hybrid loans Extension of the hybrid loan legislation Protection under tax treaties Case law Decrees 5.4. Leasing 5.5. (Potential) Limitations on interest deductions Forms of limitations General limitation on deduction of non-business costs Conduit interest and royalties Interest Definition of related persons Royalties Base eroding dividends, equity contributions, equity redemptions and hybrid loans Case law Decree Transfer of shares within a group Costs related to conversion rights Decree Case law Thin capitalisation rules Introduction Other points to bear in mind The law What is a loan The group ratio alternative Caveats Planning opportunities Acquisition and disposal costs of participations

3 Limitation and deferral of deductions in case of leveraged takeovers Case law Limitation on prevention of double taxation for interest payments within tax consolidated group Ruling practice: Financing of (foreign) participations with at least 15 percent equity Case law: Hybrid loans Interest free loans Chapter 6: Loss compensation 6.1. General system 6.2. Preventing trading in passive companies with tax losses carried forward Start up entities Advance certainty Relief Decrees Case law 6.3. The Bosal rules Do the Bosal loss compensation rules constitute illegal State Aid? 6.4. Losses in tax consolidated groups Chapter 7: Mergers 7.1. Share merger facilities Introduction Corporate income tax position under the participation exemption Corporate income tax position where participation exemption is not available Case law Exemption from real estate transfer tax Dividend withholding tax 7.2. Asset merger facilities Introduction Exemption from Corporate Income Tax Conditions Anti-abuse measure Decree: Issuing preference shares in asset mergers Exemption from real estate transfer tax Conditions 7.3. Legal mergers Introduction Legal mergers under corporate income tax law Conditions Anti-abuse measure against leveraged takeovers Exemptions from real estate transfer tax Exemption from dividend withholding tax 7.4. Legal demergers

4 Introduction Exemptions from Corporate Income Tax Conditions Anti-abuse measure against leveraged takeovers Exemption from real estate transfer tax Conditions Exemption from dividend withholding tax Chapter 8: Outbound investment 8.1. Unilateral decree for the prevention of double taxation Subject to tax criterion Definition of a permanent establishment Exemption method Calculating the exemption Example Decree on inspector s confirmation of foreign profit carried forward Passive foreign enterprise Case law Tax credit method Calculating the foreign tax credit Decree on developing country transitions Foreign tax credit for passive foreign enterprise Definition of dividends, interest and royalties Preventing trading in companies with foreign profits carried forward 8.2. Tax treaties Decrees Case law Tax sparing credits Case law: Material test of investment stimulus for tax sparing credit Decree: Tax sparing credit: policy 8.3. EC Parent Subsidiary Directive 8.4. Foreign withholding tax at the source Chapter 9: Participation exemption 9.1. Conditions Minimum participation of 5 percent Less than 5 percent participations Case law Decrees EU participations Five percent interest in taxable limited partnerships Extended participations (meetrekregeling) Low taxed portfolio participations Free investments Investments vs Free investments Determination made on allocation basis

5 Real estate participations Subject to at least ten percent income tax Country Income tax Case law Decrees Shares in passive group finance companies Gibraltar companies Application extended list of entities under Parent/Subsidiary Directive 9.2. Tax credit for low taxed portfolio participations Introduction The gross up Excluded items of income Credit for positive grossed up income EC Participations Excess EC participation credits Other excess participation credits Extensive example 9.3. Exempt items Income and gains Case law Decrees Stock options Case Law The Falcon-Case Subsequent case law: Call and put options cannot transfer beneficial ownership Earn-out arrangements Decree Hybrid loans High Court rules on prêt participatif and Titre Subordinée à Duree Indeterminée Decrees Currency exchange results Splitting profits in time Case law: Compartimenteringsarrest Gains on shares acquired through a merger 9.4. Cost deductions Ordinary costs The Bosal decision Decree on reach of the Bosal decision Case law on reach of the Bosal decision Limitations on loss compensation Acquisition and disposal costs Interest and currency exchange results on loans Hedging

6 The situation until The situation between 1997 and The situation as of 1 January The situation as of 1 January Decrees on general deduction of costs 9.5. Loss from liquidation General system Conditions Determination loss from liquidation Historic cost price Liquidation proceeds Decrees 9.6. Anti-abuse measures Conversion of loans into shares Introduction Anti-abuse measure The receivable is disposed of Converting a receivable to shares or waiving it Converting branches into participations Introduction Anti-abuse measure Decrees Amendments enacted in Making participations subject to tax Introduction Anti-abuse measure Abolishment per 1 January Decrees Chapter 10: Tax consolidated groups What it is Conditions for forming a consolidated group Additional conditions under which a permanent establishment may form part of a consolidated group Consequences of having a consolidated group Start of the consolidation During the consolidation Foreign profits and losses Decree on foreign tax relief Measures preventing double dipping of results Measures limiting leveraged takeovers Calculation example Case law Loss compensation Allocating profit to consolidated members Pre and post consolidation results

7 Decrees Example of loss compensation calculation End of the consolidation How does a consolidation end Upon deconsolidation Losses after deconsolidation Decree Reinvestment and cost equalisation reserve Intercompany debt Deconsolidation prior to liquidation Valuation of a deconsolidated subsidiary Foreign results Anti-abuse measures Transfer of hidden reserves within the group Introduction What the law says Case law Chapter 11: Inbound investment Income from a Dutch enterprise Permanent establishments Definition Partnerships Q&A Decree on international taxation Real estate Substantial interests Definition of substantial interest Residents of non-treaty countries Residents of treaty countries Taxable objects of substantial interest holders Q&A decree on international taxation Chapter 12: Dividend tax Mutual investment funds Taxable profit distributions The recognised contributions made on shares Dutch dividend tax on acquired foreign profit reserves Redemption of shares Qualification of redemption of shares under tax treaties Exemptions Participation exemption Exemptions under EC Parent/Subsidiary Directive Redemption of shares Case law Dividend distributions within a tax consolidated group Dividend tax credit

8 Defining tax with respect to specific countries Hungary Turkey Permanent establishments Tax rate and tax collection Gross up for net dividend distributions Dividend tax rates under tax treaties Dividend stripping Dividend tax in case of emigration Formal law Decrees Chapter 13: Other anti-abuse legislation Fraus legis (abuse of law doctrine) Surtax abolished per 1 January The Surtax regime Dividend stripping Background Preceding case law English market maker Dutch market maker Dividend stripping measures Legislation Some relief Conduit structures Introduction Real economic risk Real substance Transfer pricing CFC legislation Credit for underlying taxes Decrees Exchange of information Tax treaties Statute of limitations Case law Chapter 14: Ruling practice Jurisdiction Information required and other conditions under APAs and ATRs Decree on rulings for taxpayers providing intercompany services Definition of intercompany services Conditions Conduit finance structures Case law Substance requirements Q&A decree

9 14.4. Decree on good faith towards treaty partners APAs Decree on hybrid loans Statistics on ruling practice Special knowledge groups Chapter 15: Employee stock option plans Introduction Legislation Determining the deductible amount for corporate income tax purposes Dealing with shares acquired to cover the option liabilities Corporate income tax Dividend tax Case law on treatment of stock options for employer Decrees Chapter 16: Functional currency regime Beginning of functional currency reporting End of functional currency reporting Conversion rates used Foreign permanent establishments Chapter 17: Real estate transfer tax Introduction Taxable actions Exemptions Internal reorganisations Basis and tax rate Chapter 18: Special facilities for expatriate workers Tax-free expense allowance for extraterritorial expenses Conditions for the payment of a tax-free expense allowance Term of the tax-free expense allowance Extraterritorial expenses Level of the tax-free expense allowance