These arrangements concern potentially aggressive tax planning arrangements with a cross-border dimension and arrangements designed to circumvent reporting requirements like the Common Reporting Standard and Ultimate Beneficial Owner reporting. Implementation of the legislative proposal must be completed by 31 December 2019. The Netherlands should apply it as from 1 July 2020 with retroactive effect for all reportable arrangements, the first step of which was implemented on or after 25 June 2018.
A cross-border arrangement is reportable if it concerns at least one EU Member State and contains at least one of the hallmarks set out in the Directive. The Netherlands plans to implement the hallmarks in the same way as the Directive.
The term ‘arrangement’ is not further defined in the legislative proposal. An arrangement can consist of different elements such as a transaction, action, agreement, loan, commitment, or a combination thereof. The Dutch government will issue further administrative guidance on the hallmarks and obligations under the new rules.
The legislative proposal applies to arrangements in the context of all taxes except for value added tax, custom duties and social security premiums.
Some of the hallmarks only apply if the so-called ‘main benefit test’ is satisfied. The explanatory memorandum to the legislative proposal provides further guidance on this main benefit test. The terms 'tax benefit' and ‘artificial’ – which are important elements in the 'main benefit test' – can be interpreted in line with the European Commission's recommendation of 6 December 2012 on aggressive tax planning.1
A bespoke arrangement will have to be reported within 30 days after the arrangement is ready for implementation or when the first step in the implementation has occurred. Such arrangement is considered ready for implementation if there is agreement that the arrangement will be implemented. Therefore, cross-border arrangements which are conceived for and targeted at a specific taxpayer but are eventually not pursued do not have to be reported.
Intermediaries / taxpayers
The reporting obligation applies in the Netherlands to ‘Dutch’ intermediaries (natural or legal persons) and in some cases taxpayers. Foreign intermediaries without a link to the Netherlands will have no reporting obligations in the Netherlands under the proposed rules.
Who is considered as intermediary in a specific case depends on all facts and circumstances. If for instance, an engagement letter has been concluded between the ‘intermediary’ (e.g., a tax advisory firm) and the taxpayer, the tax advisory firm is considered the intermediary and not the individual employees of such tax advisory firm working on the matter. Furthermore, if an in-house tax adviser is employed by a relevant taxpayer, the taxpayer has the reporting obligation.
Fully in line with the Directive, in cases where no intermediary is involved (i.e. the arrangement is fully developed in-house), when the intermediary involved does not have a link to an EU Member State or in the case of legal professional privilege, the obligation to report lies with the taxpayer.
Intermediaries will be exempt from filing information on a reportable cross-border arrangement where the reporting obligation would breach the legal professional privilege under Dutch law (e.g. Dutch lawyers and civil-law notaries). Rather, these intermediaries must immediately notify other intermediaries involved or if there are no other intermediaries involved, the relevant taxpayer, that they have a reporting obligation.
Intermediaries and taxpayers who infringe the national provisions may be subject to penalties up to a maximum of EUR 830,000 or, in certain cases, criminal prosecution.
Taxpayers should organise themselves to be in control of the consequences of the Directive, not only in the Netherlands but in all EU Member States. Recommended actions include:
- Discuss and streamline with your advisers the information which potentially will have to be filed with the relevant tax authorities on arrangements, especially if more than one intermediary is involved.
- Review cross-border arrangements which are developed in-house or where only non-EU advisers are involved to assess whether they are reportable under domestic legislation. If so, or if the position is unclear, include information in a database to ensure that a future obligation to report can be properly fulfilled (given the retrospective effect).
Please contact your adviser at Loyens & Loeff in case of queries or in case you require more detailed information. Of course, we will inform you on further relevant developments.
This article was sent as a Tax Flash newsletter on 16 July 2019.