On 7 October 2013 the Dutch State Secretary of Finance followed up on earlier announced anti-abuse measures addressed at conduit companies that are tax resident in the Netherlands but lack sufficient economic "substance" (see below).
More specific: the State Secretary of Finance now submitted a tax law amendment that should create the legal basis for imposing a new set of "information disclosure" obligations for Dutch interest and royalty conduit companies. The Dutch tax authorities shall use the obtained information in turn for disclosure to foreign tax authorities in relevant cases.
The new set of rules are to be formalised in a Ministerial decree and at least shall cover the following items:
- Details on which kind of entities shall qualify as Dutch interest and royalty conduit companies and thus be subject to the new information obligations.
- A list of minimum "substance" conditions to be satisfied by these companies (based on existing conditions - see below).
- A specification of information to be actively disclosed to the Dutch tax authorities.
- Disclosure of information about the Dutch (tax) treaties invoked to avoid double taxation.
- Rules on "how" and "when" such information is to be disclosed.
Dutch interest and royalty conduit companies that appear to be "substance" incompliant will be subject to spontaneous exchange of information to the relevant double tax treaty partners. It is noted that omission of disclosing the required information to the Dutch tax authorities shall result in penalties with a maximum amount of Euro 19,500 in the event of wilful misconduct or gross negligence. The new rules are part of the Dutch Government's mission to actively fight against the improper use of double tax treaties.
In anticipation of the new decree each Dutch entity involved in interest or royalty flow- through activities should pay attention to its current "substance" position in the Netherlands. Although the date of entry into force is not yet clear it is not unlikely that the new rules will have effect as from 1 January 2014.