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Over the last few years, the government of the Netherlands has been keen to be seen to be taking decisive action against tax evasion. 1n July 2019, for example, the government announced its plan to close loopholes in which companies avoid tax by taking advantage of the differences in tax systems of countries, the so-called hybrid mismatches. State Secretary Menno Snel sent a bill to that effect to the House of Representatives. This bill was one of the measures taken by this cabinet to combat tax avoidance.

The ATAD2 (Anti Tax Avoidance Directive) bill is designed to stop internationally operating companies from taking advantage of the differences between the corporate tax systems of countries. These so-called hybrid mismatches ensure, for example, that payment is deductible, but is not taxed anywhere, or that one payment is deductible several times.

The most famous example of a hybrid mismatch is the CV / BV structure, also known as the "piggy bank at sea". Companies from the United States have been notoriously able to postpone taxation of their global profits for a long time with this structure. But thanks to the measures from ATAD2, the Cabinet is ending the fiscal attractiveness of this structure.

A follow-up to previous measures

ATAD2 is a logical continuation of ATAD1. ATAD1 entered into force on January 1, 2019, and addressed other forms of tax avoidance. This has led, among other things, to the introduction of the so-called earnings stripping measure, a general interest deduction limitation in corporate tax. The bill was presented to the House of Representatives in July 2019 contained further measures against hybrid mismatches.

The majority of the measures in the bill to implement ATAD2 came into force on 1 January 2020. Other European countries have also introduced ATAD2, which was welcomed by the government. Hybrid mismatches are most effective when done on an international basis.

Background to ATAD2

The introduction of ATAD2 was one of the measures taken by this government to combat tax avoidance. In addition, the method for issuing rulings with an international character was tightened from 1 July. The cabinet is also preparing legislation to levy a withholding tax on interest and royalties by 2021, with a very targeted approach to a cash flow of 22 billion euros to low-tax countries.

And more tax avoidance measures are planned. In 2024, for example, the Dutch government plans to bring in a new withholding tax on dividend flows that will apply to low tax jurisdictions. This will herald another important stage in the fight to stop tax avoidance. The new tax is planned in addition to the withholding tax that will be imposed on interest and royalties from 2021.

The new tax will allow the Netherlands to tax dividend payments to countries that levy hardly any taxes and will also help reduce the use of the Netherlands as a conduit country. The tax will be levied on countries with a corporate tax rate of less than 9% and will also apply to countries currently blacklisted by the EU blacklist. These are not half-hearted measures by any means.

Any questions? Contact our business consultants for more information.

Are you a business owner who is based in a country other than the Netherlands? Do you supply services or goods to the Netherlands? If so, you might be classed as a foreign entrepreneur in terms of VAT. You may need to file a turnover tax return in the Netherlands and you might also need to pay VAT in the Netherlands. ICS can provide you with more information about the latest VAT regulations in the Netherlands as well as calculating VAT, filing VAT returns, paying VAT, and how to deduct or claim a VAT refund.

VAT registration for foreign business owners

In certain cases, a foreign entrepreneur who has to cope with Dutch VAT can opt to register for VAT with the Dutch tax authorities.

This is a possibility, for example, if a businessman does not want to offer bank guarantees, as is a requirement for General Tax Representation. Another benefit is the fact that the latter is more straightforward to arrange than a General Tax Representation permit.

There are certain disadvantages for a non-Dutch national to register for Dutch VAT. This is because foreign entrepreneurs are not entitled to a permit under Article 23 (VAT reverse charge) because it is only for people who live in the Netherlands as an entrepreneur or are established there. Since the VAT cannot be transferred it is a given that it must always be paid.

VAT on foreign receipts

First of all: all expenses must be made for your business can be deducted. If so: you can deduct the costs.

For VAT: on hotels outside the NL, VAT of the country of the hotel will be applicable.
So for example you stay in a hotel in Germany, German VAT will be applicable. You can’t deduct this German VAT in your Dutch VAT declaration. There are possibilities to ask this VAT back with the German tax authorities, but a threshold applies and it is a time-consuming process.

This is therefore only interesting when it concerns large amounts. The costs of the hotel can of course be deducted from the Dutch profit. For airline tickets no VAT is applicable. You can deduct the costs of the profit (if it is a trip for business).

It would good to discuss with your suppliers when it is possible that suppliers do not charge you VAT. If you have an active VAT number in the Netherlands, they can verify that with the EU Vies register. And see that they are allowed to invoice you at 0% reversed charge. For other countries outside the EU, other rules apply.

How to apply for a Dutch VAT number

When foreign entrepreneurs want to apply for a Dutch VAT number, they only have to submit a few documents, but they must first complete an application form from the tax authorities. As soon as the Dutch VAT number is supplied, a foreign entrepreneur is legally able to trade in any country within the European Union.

Adequate VAT administration is needed for this and this is where a company such as ICS can provide valuable assistance. An international company can opt to have this administration undertaken by an administration office based in the Netherlands. The Tax and Customs Administration carries out strict checks, especially when reclaiming VAT so it is extremely important to ensure that the correct paperwork is always in order. If the administration is outsourced to an accounting office, this office is not responsible for the activities with which the foreign company is involved in the Netherlands.

Do you want assistance with applying for a VAT Registration for foreign entrepreneurs? The experienced VAT specialists at ICS will help you on your way.

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