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The Netherlands has an open tax system that provides the possibility to discuss tax matters with the tax office and to obtain Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA).


Background and history 

The Netherlands traditionally has an extensive, efficient and reliable advance-ruling practice, which provides for various rulings for different types of activities/structures. Nowadays the main subject of tax rulings is application of transfer pricing principles.

An advance tax ruling is an agreement between the Dutch tax authorities and the taxpayer about the application of Dutch tax law regarding (future) transactions, investments or corporate structures, i.e. it determines the profit which the tax payer should generate for its activities in the Netherlands.

For foreign investors who may consider taxation a significant factor to decide on a possible location, and who like to avoid uncertainty about taxation in the future, the Dutch tax system offers the advantage that it is possible to obtain clarity and certainty in advance, thus before the actual activities are started up or the structure is established.

The old ruling policy

Decades ago, the Dutch Ministry of Finance developed a set of standard rulings for certain frequently occurring situations, like for example application of the participation exemption for holding companies, the determination of an arm’s length remuneration for finance and royalty activities, and the application of the so-called cost-plus method for activities of an auxiliary and supportive nature. 

Under this old ruling policy (abolished in 2001; see below), mainly passive finance and royalty companies were attracted to the Netherlands (so called flow through companies) with little substance, and in many cases no or very low business risks. Under this old ruling policy the arm’s length remuneration was determined as a fixed margin: for instance for financing as a percentage (spread) off the average funds borrowed and lent on per annum, and for royalties a percentage of net royalties received.

This old ruling policy has been replaced by new policy in 2001. Existing structures were allowed a grandfather period up to 2005.

The current ruling policy

In 2001 the old Dutch ruling practice was restructured into an Advance Pricing Agreement ("APA") and Advance Tax Ruling ("ATR") practice.

The new ruling practice contains new elements, but most of it is in fact a codification of already existing but not yet legalized practice. The policy also prescribes the procedure for obtaining rulings.

The main changes relate to so-called "Financial Services Companies", which include finance companies and royalty companies. Under the current ruling policy structures that do not have real substance in the Netherlands (substance requirements), such a pure flow through royalty structures, are in essence no longer eligible for a ruling, unless they agree in advance with certain exchange of information procedures with other countries. Rulings can however still be obtained for group finance companies provided that the Dutch company meets substance requirements of both an operational and economical nature.

The substance requirements formally do not apply to holding companies, so that it is still possible to set up a Dutch holding company with low substance in the Netherlands, although due to the introduction of various anti-abuse provision in Dutch domestic tax law, tax treaties and the European Directives, such low substance holding companies in many cases lost their tax benefits. This does however not mean that the Dutch tax regime for holding companies has lost its attraction. In fact, quite to contrary, the contemporary Dutch tax regime for holding companies is still one of the best of the world and keeps attracting the set up of regional head offices and Hubs of multinationals and internationally operating SME's. For more information about the Dutch holding regime, please consult our publication The Dutch Holding Company.        

Depending on the intended activities and/or intended structure you can either obtain an Advance Pricing Agreement or an Advance Tax Ruling.

Advance pricing agreement (APA)

An APA provides certainty in advance regarding transfer-pricing issues.

Typical issues to be governed in APA agreements are the prices which are charged within a group of related companies for services rendered or goods delivered. These kinds of rulings are issued within the scope of Dutch transfer pricing principles.

For more information about the Dutch transfer pricing rules, please consult our publication Transfer pricing in the Netherlands.   

An APA request can, in principle, cover all transfer-pricing issues of a taxpayer or may be limited to specific associated enterprises or to specific transactions. This may be an important feature when deciding to conduct actually business in the Netherlands.

For example, the goods you intend to sell on the Dutch market are manufactured in your home country and you wonder what remuneration your Dutch subsidiary should receive for its sales and marketing activities.

In line with sound business practice, a company operating in the Netherlands is considered to aim for added value and as such should report a proper remuneration in relation to the activities it performs. Even when the activities performed are of an auxiliary or supportive nature, the Dutch company is required to report a minimum margin. In essence, your Dutch subsidiary should receive an arm’s length remuneration for the services and/or activities it performs.

You can basically only obtain an APA if you are able to demonstrate that the transfer prices you use or intend to use are consistent with the arm’s length principle, which in general means that the conditions of transactions between group companies are comparable with conditions of transactions conducted by unrelated companies. As stipulated before, each and every company involved should receive a remuneration that is a reflection of the functions performed, taking into account the assets used and the risks assumed.

The arm’s length principle as incorporated in Dutch tax law and concrete guidelines are given in policy. For more information about the Dutch transfer pricing principles we refer to the publication of the Dutch Ministry of finance: Transfer prices, the application of the arm’s length principle and the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines), Decree of 30 March 2001. When filing the APA request it should not only include information on the transactions, products, business or arrangements that need to be covered but also which parties will be involved, information about the world wide organizational structures and last but not least a description of the proposed transfer pricing methodology.

In principle you are free to choose the most suitable transfer pricing method provided that the method chosen leads to an arm’s length remuneration for the specific transactions or activities for which certainty in advance has been requested and you will be able to support the method chosen. Other information to be provided concerns amongst others a critical assumption upon which the methodology or price is based, a general description of the market conditions and the accounting periods to be covered.

The procedure for requesting an APA is described in policy.  

Financial Services Companies

The ruling policy furthermore provides concrete guidelines for qualifying Financial Services Companies, which include financing companies and royalties companies.

In order to qualify for an APA, a qualifying Financial Services Company (rendering financial services to related parties) must comply with the substance requirements both from an operational and an economical nature.

As the operational substance requirements are concerned, the Dutch company should have professionally skilled Dutch resident directors (either individuals or companies) which form at least half of the board and who have certain real decision power. Major decisions will have to be taken in the Netherlands. Furthermore, all kind of administrative activities should be performed out of the Netherlands.

As regards the economical substance, the company should run real business risks in relation to its activities and should have sufficient equity at stake. The risks to be run for finance companies are well defined and include credit risks (bad debt risks and currency risks), market risks, etc. As a safe haven a minimum requirement for the equity at risk is introduced; the equity should be at least 1% of the amount of outstanding receivables with a maximum of € 2,000,000. In addition, the financial service company should make an adequate return on equity (ROE). In addition, the Dutch Secretary of Finance explained that the appropriate amount of equity should be in line with the risks to be borne and should therefore be determined based on the facts and circumstances on a case by case basis. Though a financial service company performs intra-group finance activities while a bank/financial institution is involved in transactions with third parties, for the determination of the appropriate equity in connection with the finance transactions, reference is for example made to the so called Basel Capital Accord, which introduced a capital adequacy framework for financial institutions (per asset/loan the risks are to be considered and in connection thereto a minimum capital is to be recognized).

For royalty companies there are no specific guidelines yet, but it is understood that a similar approach should be followed as the one that applies to the finance company. Informally however, representatives from the Dutch tax office stated that a royalty conduit company is considered to incur real risks on its activities in case its equity is the lowest of 50% of the expected gross royalty payments or EUR 2,000,000. Moreover, a minimum of 50% of the minimum equity should be paid as an advance to the licensor to substantiate that the royalty conduit company is running risks. The Dutch licensing company should make an adequate return on equity (ROE) as well. 

Many countries have imposed anti-treaty shopping legislation to counter the use of passive finance and royalty companies. In general terms the Dutch company should meet certain substance requirements before it can claim treaty benefits (like a reduction of withholding taxes in the source state). The Dutch substance requirements imposed on Financial Services Companies can from a perspective of tax treaty protection be considered as a save harbor i.e. when the Dutch company meets the Dutch substance requirements it should in most cases qualify for treaty benefits in other countries as well.

Advance Tax Ruling (ATR)

An ATR provides certainty in advance regarding the tax consequences of certain international structures and/ or transaction.

An ATR can be requested for amongst others: 

  • The application of the participation exemption for intermediate holding companies or top holding companies
  • International structures in which hybrid financing forms or hybrid legal forms are involved
  • The (non) existence of a permanent establishment in the Netherlands.

The procedure for requesting an ATR is described in policy.


The validity of both an APA and an ATR is laid down in the agreement. In principle you are free to indicate the term for which it is reasonable to provide certainty in advance but you should be able to support that. In general, a period of four or five years can be considered. After expiration of this period, you may request for an extension, which is normally granted under the same terms and conditions.

Possible retroactive application

Though an APA generally applies to future transactions or activities, in certain cases it may be possible to get clearance on (comparable) transactions in earlier years.

The ruling request

The APA or the ATR request should be filed with the competent tax inspector who will present the request to the APA/ATR team of the tax authorities in Rotterdam for binding advice. The Dutch tax authorities will evaluate the request and consider all facts and circumstances linked with the transactions or activities for which certainty in advance is requested.

The authorities aim to process a request within eight weeks but this period may be extended if additional information is needed for evaluation.


When the Dutch tax authorities accept the APA or ATR request, a binding agreement ("vaststellingsovereenkomst") is to be concluded between the taxpayer and the Dutch tax authorities. In case of multilateral or bilateral APA rulings, such an agreement will also be included between the countries involved.


Periodical audits can be expected examining whether the transfer prices used are in accordance with what has been agreed upon in the agreement. 

What can we do for you?

We have extensive experience with negotiating Advance Tax Rulings and Advance Pricing Agreements. We can amongst others provide the following services in relation thereto:  

  • Advice on an appropriate tax structure
  • Advice on transfer pricing issues
  • Feasibility study of tax ruling
  • Preparation and filing ruling request
  • Negotiations with the tax inspector

If you are interested in our services, please feel free to contact us via e-mail or to call us at our offices in Amsterdam +31 (20) 5709440 or our office in Rotterdam +31 (10) 2010466.