Cooperative compliance and rulings in Holland
Updated on 19 February 2024
A characteristic feature of the tax system in the Netherlands is the option to consider the treatment of particular transactions or operations with the tax authorities in advance. The Tax Administration may give you advanced clearance. The National Tax Authorities can conclude two types of agreements with the taxpayers: an Advance Pricing Agreement (APA) or an Advance Tax Ruling (ATR).
APAs are agreements where the Tax Authorities specify the method of pricing that will be applied by the taxpayer to company-related transactions. This programme gives taxpayers the option to resolve or avoid potential or actual disputes on transfer pricing in a cooperative, proactive manner.
ATRs are agreements with the Tax Authorities that determine the legal obligations and rights of the taxpayers in their specific situations.
APAs and ATRs are binding both for the Tax Authorities and the taxpayer. Their conclusion is subject to particular substance requirements. Generally the Tax Administration is able to process requests for ATRs, APAs and other inquiries (for instance for VAT registration, fiscal unity or facilitated merger) without significant delays.
The EU law requires the Tax Authorities in Holland to automatically exchange data on APAs and ATRs with the National Tax Authorities in other Member States. The Tax Administration has prepared standard documents that taxpayers fill in to conclude cross-border rulings or arrangements with respect to transfer pricing. All National Tax Authorities in the EU are required to exchange such information. This improves the transparency with respect to corporate taxation in the Community. Eventually the EU may also start exchanging similar information with National Tax Authorities in non-members.
If certain conditions are fulfilled Dutch businesses can apply for the so-called horizontal monitoring (enhanced relationship with the National Tax Authorities). Horizontal monitoring is a type of voluntary cooperative compliance where the organisation concludes a specific agreement with the Tax Administration. This provides advanced assurance and security and prevents taxpayers from bad tax surprises. Still the scope of horizontal monitoring includes more than legislative compliance: the business needs to demonstrate that it controls its tax risks and processes by using a Framework for Tax Control.
The National Tax Authorities adjust their monitoring intensity and methods with respect to the taxpayer’s tax control level. Hence their audits will switch from reactive (performed for past periods) to proactive (to provide security upfront). The relationship between businesses and the Tax Authorities in horizontal monitoring rests on transparency, mutual understanding and trust.
The main advantage of this arrangement is the possibility to deal with relevant tax positions and risks at the time of their occurrence within plausible commercial deadlines. Companies are expected to behave transparently in their interactions with the Tax Authorities and, in turn, the administration responds quickly with regard to issues brought to its attention by these businesses. Furthermore the horizontal monitoring programme helps to accurately determine taxable cash flows, current and deferred taxes, and guarantees that companies have few, if any, unsure tax positions. This saves businesses both costs and time. However it is worth mentioning that the Dutch Tax Administration has not yet formulated objective principles regarding the requirements for the Framework for Tax Control.