Advance pricing agreement


ATRs and APAs are binding agreements between the Dutch tax (and customs) authorities and the taxpayer on the application of Dutch tax law. Such rulings ensure a certainty in advance of the acceptability of a certain scenario. The Netherlands has a modern and reliable system for obtaining advance tax and pricing rulings. The current practice is the result of a restructuring in 2001, where the practice was brought in line with OECD principles. In this respect, a number of resolutions were issued (and some updated in 2004), describing the Dutch ruling practice.

The OECD Transfer Pricing Guidelines provide the backbone of the Dutch APA procedure. An APA can relate to a specific transaction, or all transfer pricing matters of a taxpayer. It will in principle be concluded for a period of 4 years (retroactively is possible), and can be entered into by the Dutch tax authorities unilaterally, bilaterally and multilaterally.

Intragroup financial services

Intragroup financial services (i.e. back-to-back financing and/or licensing activities) are subject to the financial services resolution (from 2001, and updated in 2004). Companies that qualify as a financial services company under these resolutions are defined as entities whose activities consist for at least 70% of intragroup financing and/or licensing activities (excluding holding of participations). Note that advance certainty can only be obtained in combination with advance certainty on the appropriate transfer pricing method or arm’s length remuneration.

Substance requirements

If the entity does not have substance in the Netherlands and does not run true economic risks in relation to the financial services, advance certainty cannot be obtained. A number of criteria are set to determine whether there is sufficient substance in the Netherlands, of which the most important are the following:

  • 50% or more of the directors of the Dutch entity are resident in the Netherlands;
  • The directors avail of required professional knowledge to perform their duties satisfactorily;
  • The entity is effectively managed in the Netherlands, and its principal place of business is the Netherlands;
  • The bank account(s) of the entity must be maintained in the Netherlands, and the bookkeeping of the entity needs to be performed in the Netherlands;
  • The entity has sufficient equity (considering the assets used and risks assumed) to undertake its activities.

Risk requirements

If an entity is engaged in financial services consisting of providing loans to group entities, it will under the financial services resolution be deemed to run economic risks (e.g. receivable risks and currency exchange risks), if its equity is the lower of:

  1. 1% of the amount of the loans provided; or
  2. € 2,000,000.

Intragroup license activities are eligible for a similar rule and will be deemed to run sufficient economic risks if the underlying equity at risk is equal to (at least) the lower of an amount of € 2,000,000 or 50% of the annual royalty inflow.

These risk requirements have also been codified in Dutch tax law. Note that if the Dutch entity does not run economic risks in respect of its financial services, it will not be allowed to credit foreign withholding taxes. Furthermore, in such case the interest or royalties received do not form part of the taxable income of the Dutch entity, since the entity is considered only to provide a service to group companies.


No comment yet.

Leave a Reply