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Dutch guideline for reportable arrangements (DAC6) published

30/06/20

On the basis of a European directive, (tax) advisors or taxpayers are obliged to actively report certain tax arrangements to the tax authorities. This directive is known as 'DAC6' and has also been implemented in Dutch legislation. It concerns the reporting of transactions that have certain 'hallmarks'. In addition, several hallmarks only apply if one of the main expected benefits of a transaction is a tax benefit. The aim of the legislation is to share knowledge of tax structures between countries in order to give the legislator the opportunity to combat undesirable tax avoidance. To this end, the notifications received by the relevant tax authorities will be exchanged with the tax authorities of the other Member States of the European Union.

When the DAC6 Directive was introduced into Dutch legislation, it was stated that the Dutch tax authorities would come up with a Guideline for practice. It is meant to create clarity about certain common situations. This Guideline has now been published.

Also, it has now been announced that the reporting obligations have been postponed by six months. There already was an initial period for which reporting was to take place at a later date, namely for transactions between 25 June 2018 and 1 July 2020. This remains the case, but the deadline for reporting transactions from this initial period is now extended further, to 28 February 2021. The notification of advice and transactions from 1 July to 31 December 2020 has also been extended and must now take place no later than 31 January 2021.

Open standards: lack of clarity in the interpretation of terms

Despite the fact that we are dealing with extensive legislation, there is a lack of clarity in the interpretation of terms on many provisions and subjects. This is due to the fact that the European legislator has made extensive use of open standards. While the use of open standards instead of more detailed rules is understandable from the legislator's point of view, it also means ambiguity and uncertainty. For intermediaries and businesses, but also for the tax authorities. That is why during the legislative process it was promised that the tax authorities would draw up this Guideline.

Which questions does the Guideline answer?

In practice, there already are many more questions than are answered in the Guideline. Yet, the Guideline does provide clarity on, among others, the following points:

  • An important eye-opener is that arrangements which at first sight appear to be purely domestic may, on closer inspection, fall within the scope of the reporting obligation. The Guideline confirms, among other things, that a legal merger between two Dutch sister companies with a parent company established abroad is a 'cross-border arrangement', even though the merger concerns two Dutch companies. Whether this arrangement is also reportable, depends on whether a hallmark is met.
  • The 30% rule is a Dutch facility that makes it attractive for highly qualified, foreign personnel to come to the Netherlands. Although this scheme contains a tax benefit, advising or making use of this scheme does not have to be reported (under hallmark B.2). 
  • Certain mismatches between legislation in different countries must be reported, for example specific situations where interest is deductible in one country but not taxed, or taxed at a lower rate, in the other. According to the Guideline, this does not only concern interest actually paid, but also imputed interest (e.g. on interest-free loans). This is striking in the sense that there is no actual 'payment' as specified under Hallmark C.1.
  • If interest paid by a group company in the Netherlands is deducted and the foreign receiving group company is not taxed because of a zero rate, but its shareholder is taxed because of CFC legislation there, it still falls under hallmark C.1. Whether or not this must also be reported depends on the Main Benefit Test, see below.
  • A merger in which a foreign subsidiary merges into its Dutch parent must be reported (hallmark E.3). This is independent of whether any tax benefit is intended or achieved. The Guideline does not answer the question of whether an intra-group sale of a participation also becomes subject to reporting under hallmark E.3. and whether or not the application of the participation exemption is relevant here.
  • Certain hallmarks only apply if the so-called Main Benefit Test is met. In short, in practice the 'Main Benefit Test' will have been met: 
    • if a construction would not go ahead without the expected tax benefit, or 
    • if elements have been added to a construction in order to obtain a tax benefit artificially.

If you would like to know more about the European DAC6 directive, please read more here.

Helpdesk tax authorities: the MDR team

An MDR (‘mandatory disclosure directive’) team has now been formed within the tax authorities that will, among other things, fulfil a helpdesk function for intermediaries and taxpayers. This team also drew up the Guideline. Consultations with the MDR team can only take place in anonymised form. This deviates from preliminary consultation as we know it from taxation itself. In that case it is in fact possible to present your individual situation to the inspector. In addition, the MDR team will be responsible for communication with other countries and the European Commission.

Can you rely on this Guideline?

The Guideline is not legislation in a formal sense. Instead it is an expression of the tax authorities from which advisors and businesses can derive trust. Advisors and businesses can therefore rely on the application of the Guideline. However, should the Guideline contain positions that deviate from the legislation, the adviser or taxpayer may also take the law itself as a starting point.

What does it mean for you?

The Guideline provides answers to a number of important questions. In particular, the obligation to report mergers and the treatment of interest (whether or not imputed) has been clarified, as has the application of the 30% rule for expats. However, many situations remain unclear, such as how to deal with sales of participations within a group.

In cases where even with this Guideline in hand, there is still ambiguity about the obligation to report, we expect that the arrangement will often be reported to the tax authorities for the sake of certainty, in order to avoid the risk of possible penalties. Naturally, we, as advisors, will include the DAC6 aspects of our advice in our discussions with you.

Contact us

Edwin Visser

Edwin Visser

Partner, PwC Netherlands

Tel: +31 (0)62 294 38 76

Robert Jan Meindersma

Robert Jan Meindersma

Senior Director, PwC Netherlands

Tel: +31 (0)68 360 84 41

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