May 31, 2024

Developments in Anti-Abuse Measures And Acquisition Financing in the Netherlands

May 31, 2024/ Ruchelman P.L.L.C.

Last year, Insights published an article by Michael Bennett on cases in which the Dutch tax authorities used Article 10a of Dutch tax law and the concept of fraus legis to challenge deductions for interest expense on certain internal borrowings. The article pointed out that many grey areas and interpretative issues remained. Since that article was published, the Dutch Supreme Court, the Advocate General for the C.J.E.U., and the Advocate General of the Netherlands have issued opinions on three separate cases. In his article in this edition of Insights, Michael Bennett reviews the opinions and points out the ongoing uncertainty surrounding the precise scope of Article 10a and its interaction with fraus legis.

May 31, 2024

Netherlands: New Legislation to Combat Hybrid Mismatches

May 31, 2024/ Ruchelman P.L.L.C.

Late in 2023, the Netherlands parliament adopted a legislative proposal intended to significantly reduce the use of hybrid mismatch arrangements by companies operating internationally. While the legislative proposal reflects the policy of A.T.A.D. 2. – combatting hybrid mismatches – it does so through the adoption of a system to achieve uniform classification of entities on a cross border basis. Gerard van der Linden, a partner of Van Olde Tax Lawyers in Amsterdam, and Thijs Poelert, an associate at Van Olde Tax Lawyers in Amsterdam, explain the fixed method and the symmetric method for classifying foreign entities that are at the core of the law. Classification rules for certain domestic and foreign entities have been modified significantly. C.V.’s, L.P.’s, and L.L.C.’s will be treated as fiscally transparent. The new law is scheduled to take effect on January 1, 2025.

January 30, 2023

Anti-Abuse Developments: A New Normal in the Netherlands

January 30, 2023/ Ruchelman P.L.L.C.

“Doe normaal” is practical advice in the Netherlands encouraging one to act normal. In the past, that phrase would describe commonly used plans to reduce tax. Today, if the old normal is followed by a multinational group effecting an acquisition, the group could end up facing unintended tax consequences. Legislators and tax authorities are increasingly examining traditionally “normal” acquisition structures and financing arrangements in a quest to combat deemed abusive tax arrangements. Like its fellow E.U. Member States, the Netherlands has shifted its tax policy agenda in recent years in line with international and E.U. initiatives to target perceived abuse. In a similar way, the U.S. has targeted abusive arrangements for several decades via common law doctrines and codified anti-abuse rules, including the economic substance doctrine and conduit financing regulations. Michael Bennett, a U.S. attorney, recounts recent developments in the Netherlands based on a two-year assignment as a U.S. tax adviser in the Amsterdam Office of a major international law firm. He also addresses “economic substance” rules followed for close to a century in the U.S. This is Mr. Bennett’s first article for Insights as an associate of Ruchelman P.L.L.C.

March 30, 2021

Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6

March 30, 2021/ Ruchelman P.L.L.C.

In his Article entitled “Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6,” Paul Kraan of Van Campen Liem in Amsterdam, zooms in on a number of aspects and features of D.A.C.6 that are addressed in the Guideline, noting that there may be differences in interpretation between the various Member States with respect to the same provisions of the directive. Some are generic, others focus on specific Categories of Hallmarks such as B, C and E and the main benefit test. The article serves as a guide through a maze of troubling issues for which firm answers may not exist at this time.

March 20, 2020

The Netherlands Introduces Compensation Regulation to Discourage “Dormant Employment”

March 20, 2020/ Ruchelman P.L.L.C.

· For U.S. tax advisers not versed in Dutch labor law, the world of employee rights and employer obligations is a thing to behold. To illustrate, in 2015, the Dutch parliament enacted a law under which an employee in the Netherlands having spent 104 weeks on paid sick leave is entitled to a transition payment if the employment contract was terminated by the employer. However, many employers attempted to avoid the payment by retaining these employees under “dormant contracts,” where the contract remained in force but there was no position available and no pay. New legislation effective April 1, 2020, breaks the deadlock. The transition fee remains in effect, but all or most of the payment is funded on a deferred basis by the Dutch government. Rachida el Johari and Madeleine Molster of Saguire Legal, Amsterdam, the Netherlands, explain how the Compensation Regulation works and propose a winning strategy for employers.

February 28, 2019

Insights Vol. 6 No. 2: Updates & Other Tidbits

February 28, 2019/ Ruchelman P.L.L.C.

This month, Neha Rastogi and Nina Krauthamer look at interesting items of tax news from around the world: A new foreign investment law could ease the U.S.-China trade war, and another illegal State Aid investigation has been announced — this time over Dutch tax rulings issued to Nike and Converse.

October 31, 2018

Dutch Corporate Tax Reform: Dividend Tax Remains, A.T.A.D. Arrives, and Tax Rates Drop

October 31, 2018/ Ruchelman P.L.L.C.

Across the globe, the landscape for international tax is in a constant state of change. Nowhere is this more evident than in the Netherlands. On the third Tuesday of September, a repeal of the dividend withholding tax was announced. Within a month, it was withdrawn. Paul Kraan, a partner of Van Campen Liem in Amsterdam, discusses the remaining tax proposals presented by the Dutch government on the eve of the third Tuesday of September. These include provisions related to A.T.A.D. 1, such as G.A.A.R., an exit tax for corporations, a C.F.C. anti-abuse rule, and a cap on the deductibility of net interest expense. Also discussed is an existing unilateral exemption from withholding tax on cross-border dividend payments in (i) the context of an income tax treaty and (ii) the presence of economic substance for the direct or indirect shareholder. This exemption is likely to remain in the law.

May 09, 2018

Failure to Prevent – The Future of Adviser Obligations

May 09, 2018/ Ruchelman P.L.L.C.

The concept of failure to prevent has grown from its roots in the U.S. Foreign Corrupt Practices Act and is making inroads into the responsibilities of tax advisers. The recent trend begs the question, do advisors have a duty to prevent the evasion or improper reduction of tax or to report the activity in advance? A team of international advisors looks at the evolution of obligations: Peter Utterström of Peter Utterström Advokat AB, Stockholm, looks at the origin of the concept. Gary Ashford of Harbottle & Lewis, London, looks at recently adopted legislation in the U.K. imposing strict liability on advisers to naughty clients. Lawrence Feld, Attorney at Law, New York, looks at its presence in the U.S. Swiss Bank Program of the Justice Department. Dick Barmentlo of Jaegers & Soons, Amsterdam, addresses a recent case in the Netherlands that imposes civil liability on a Netherlands trust company and its employees for lost taxes suffered by the Dutch tax administration.

October 24, 2017

Double Dutch: Dividend Tax Reform Extends Exemption, Yet Tackles Abuse

October 24, 2017/ Ruchelman P.L.L.C.

This year’s budget in the Netherlands contains a legislative proposal that introduces a unilateral exemption applicable to corporate shareholders based in treaty countries, such as the U.S., subject to stringent anti-abuse rules. In addition, it proposes to bring cooperatives used as holding vehicles within the scope of the dividend withholding tax rules. Soon after the proposals were announced, a coalition government was formed and announced a complete elimination of dividend withholding tax. Paul Kraan of Van Campen Liem in Amsterdam explains.

March 15, 2015

Insights Vol. 2 No. 3: F.A.T.C.A. 24/7

March 15, 2015/ Web Admin

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FOREIGN ACCOUNTS – UPDATE TO 2014 INSTRUCTIONS TO FORM 8938

Form 8938, Statement of Specified Foreign Financial Assets, requires the disclosure of certain foreign financial assets owned by U.S. citizens, resident alien individuals, and nonresidents who elect to be treated as resident alien individuals for U.S. tax purproses. (E.g., a nonresident alien having a U.S. citizen spouse may elect be treated as a U.S. resident for purpose of filing a joint income tax return.) Form 8938 is attached to the individual’s income tax return for the applicable year (starting with tax year 2011) and must be filed by the due date for said return, including extensions.

Updates to the 2014 instuctions for the Form 8938 reporting requirements were announced on March 10, 2015 and incorporate final Treasury Regulations under Internal Revenue Code (the “Code”) §6038D, adopted in December 2014. The final regulations are effective for taxable years beginning after December 19, 2011. The update contains additional information not included in the updated instructions for Form 8938. Taxpayers and their tax return preparers must review these recent changes to the form’s instructions to make sure it does not affect their filing obligations.

Dual Resident Taxpayers

A dual resident taxpayer, within the meaning of these regulations, is an individual who is considered a resident of the U.S. under the Code and applicable regulations because he or she meets the “Green Card Test” or the “Substantial Presence Test” and is also a resident of a treaty country (pursuant to the internal tax laws of that country). The updated instructions apply to dual resident taxpayers who determine their income tax liability for all or a portion of the taxable year as if they were nonresident aliens (pursuant to a provision of an income tax treaty that provides for resolution of conflicting claims of residence by the U.S. and its treaty partner).