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11 July 2017 / news

Dutch implementation proposal for EU Anti-Tax Avoidance Directive published

On 10 July 2017, the Netherlands published a preliminary proposal (the Proposal) to implement the Anti-Tax Avoidance Directive (ATAD1), as adopted by the EU in 2016.


The Proposal addresses interest deductibility, exit taxation, general anti-abuse (GAAR) and Controlled Foreign Companies (CFC). The Proposal is published for consultation purposes and is open for consultation until 21 August 2017. Implementation must be completed per 1 January 2019.

ATAD1 also contains rules with respect to hybrid mismatches, which rules were expanded by the directive that the EU adopted on 29 May 2017 (ATAD2). As these expanded rules will become effective only as of 2020, they will be addressed in a separate proposal, to be published later.

The Proposal contains new rules to limit the deduction of interest on the basis of earnings stripping and CFC rules. In addition, the Proposal provides for minor adjustments to the exit taxation rules. The GAAR will not be implemented separately, based on the view that the abuse of law-doctrine as developed in Dutch case law achieves the same goal.

Interest deduction rules

In principle, the Proposal adopts the minimum rules as prescribed by the ATAD1 with respect to the earnings stripping interest deduction limitation. According to these rules, the deduction of net borrowing costs is limited to the highest of (i) 30% of the earnings before interest, taxes, depreciation and amortization (EBITDA) and (ii) an amount of Euro 3 million. The Proposal does not yet make a choice whether a worldwide group ratio escape rule will be implemented, and, if so, whether this will be an equity escape rule or an earnings-based worldwide group ratio rule. Any borrowing costs that will not be deductible as a result of the earnings stripping rules, can be carried forward indefinitely.

The ATAD1 specifically allows that the new rules will not apply to (i) financial institutions, (ii) loans which are used to finance infrastructural projects and (iii) existing loans. However, the Proposal does not exclude these categories from the new interest deduction limitation. Furthermore, the Netherlands have not opted to defer implementation of the earnings stripping rules until 2024, as is allowed (under certain circumstances) by ATAD1. Finally, it is not yet clear whether any of the existing interest deduction limitation rules will be abolished or amended, as a result of the implementation of the earnings stripping rule. This is one of the topics about which the government wants to receive input during the consultation.

CFC rules

As regards CFC, the Proposal is based on the income approach (as opposed to the transaction approach) by including non-distributed types of income of a controlled foreign company (such as interest, royalties and dividends and capital gains realized on the transfer of shares) in the taxable income of its Dutch parent company, unless the controlled foreign company carries on a substantive economic activity, supported by staff, equipment, assets and premises. Corporate tax paid by the controlled foreign company can be credited by the Dutch parent company against Dutch corporate income tax. An important question in the consultation however is whether the transaction approach should be adopted instead.

As a new government has not yet been formed, the Proposal is published for consultation by the outgoing government. It is not certain whether the new government will follow the choices made by the outgoing government. In addition, the outcome of the consultation may certainly affect the final implementation of ATAD1 in the Netherlands. The official proposal is expected to be released in the first quarter of 2018.


We will keep you updated on all relevant developments and would be pleased to assist in case you want to provide input on the Proposal during the consultation period. Should you have queries, please contact us.


Although this publication has been compiled with great care, Loyens & Loeff N.V. and all other entities, partnerships, persons and practices trading under the name ‘Loyens & Loeff’, cannot accept any liability for the consequences of making use of this issue without their cooperation. The information provided is intended as general information and cannot be regarded as advice.



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