On March 30 2001 the Ministry of Finance introduced a new Advance Tax Rulings (ATR) system. Under the new guidelines ATRs can be obtained - as in the past - for holding companies, financial service companies (eg financing and licencing companies), hybrid financing structures and permanent establishments. The aim of the new system is to improve the fiscal climate and to avoid the criticism that was heard in the past within the EU. An ATR will take the form of an agreement and will be published in an anonymous form
An ATR will only be possible if the Dutch entity will disclose the full group structure, including the ultimate owners. Financial service companies will have to meet certain minimal substance requirements, which have been specifically defined. In addition, the company requesting a ruling has to agree that - in the case of information being exchanged between The Netherlands and another state - the ATR does not contain any information, such as commercial, industrial or professional secrets, that in general may not be exchanged under a double tax treaty.
Apart from the procedure for obtaining an ATR and the above-mentioned conditions, there are no major changes with respect to participation exemption rulings. The cost price of a foreign participation for which an ATR is requested will have to be financed (as under the 'old' system) with at least 15% equity. Financial service companies that do not run any real financial risks have to agree in advance that there are no objections against spontaneous exchanges of information by the Dutch Revenue Service that will take place, eg when a statement of residency is requested, provided that the prevailing double tax treaty and national law allows this. Real financial risks include currency exchange risk, risk of bad debts, market risks and operational risks. The equity of a financial service company is also an indicator here. Financing companies are obligede to have equity equal to at least 1% of the volume of the loans flowing through the ccompany, oror euro 2 million ($1.8 million).
Generally it is thought that the new rules provide for a contemporary and stable system that can pass the tests of an EU - and also global - tax perspective.
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.