The Dutch government at the end of October 2018 launched an internet consultation to allow interested parties an opportunity to respond to a draft bill to implement the EU Anti-Tax Avoidance Directive (ATAD2).
ATAD2 addresses tax avoidance via hybrid mismatches in affiliated relationships. Hybrid mismatches concern situations when differences between tax systems are used with regard to the qualification of entities, instruments or permanent establishments. Hybrid mismatches may result in a tax deduction, whereby the corresponding income is not taxed anywhere or when the same payment is deducted several times.
The consultation document distinguishes between hybrid mismatches with:
In line with ATAD2, the consequences of these hybrid mismatches would be “neutralized.” Depending on the mismatch and the treatment outside the Netherlands, this would be effected by refusing the deduction or taxing the income. The neutralization would only take place to the extent necessary to neutralize the mismatch (proportionally).
ATAD2 links Dutch corporate income tax to the tax systems of other countries. As a result, international arrangements would become even more sensitive to regulatory changes in the various countries. The hybrid mismatch rules would apply to financial years commencing on or after 1 January 2020. As of 1 January 2020, the policy statement on hybrid entities under the tax treaty with the United States would be withdrawn (Policy Statement of July 6, 2005, IFZ2005/546M). In short, this policy statement provides for the reduced rate on dividends in the tax treaty with the United States to be applied to BV/CV (private limited liability company/limited partnership) structures.
Read a November 2018 report prepared by the KPMG member firm in the Netherlands
The KPMG report also:
The Dutch consultation closes on 10 December 2018. If approval is granted, the responses would be published. After the consultation has closed, the response would be included in a final bill. After the implementation of ATAD2, Dutch corporate income tax would become even more complex. International arrangements would need to be re-assessed and possibly modified.
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