Dutch transfer pricing rules for permanent establishments (branches)

The at arm's length principle provides that the branch should act with "related parties" on an at arm’s length basis.

This rule specifically also applies in the relationship between the branch and its head office. For Dutch branches of foreign corporations, or foreign branches of Dutch corporations, the Dutch transfer pricing principles apply as well. For these kind of situations the at arm’s length principle is thus not only relevant for determining fiscally acceptable internal transaction prices, but also for determining the appropriate profit allocation between a head office and the branch.

On a transactional level there is an essence no difference between a branch and a Dutch corporation if it comes to the transfer pricing issues. However, the special relationship between the head office and the branch (no separate legal status) causes some typical deviations, for instance the ignoring of internal interest charges from the foreign head office to the Dutch branch which are not backed up by external interest charges.