The Netherlands imposed new guidelines on the transfer pricing, following the model provided by theOrganization for Economic Cooperation and Development (OECD). On the 11th of May 2018, the Dutch authorities issued a new Transfer Pricing Decree (IFZ2018/6865), which prescribes new guidances on the application of the arm’s length principle.
The new legislation also includes the OECD’s regulations on Base Erosion and Profit Shifting (BEPS) and follows the 2017 OECD guidelines on Transfer Pricing; the document also replaced theDutch Decree issued in November 2013. Our Dutch accountants can offer in-depth information on the tax regulations prescribed under the new legislation.
| Quick Facts | |
|---|---|
| Specific regulations (if any) | Transfer Pricing Decree (IFZ2018/6865). |
|
Compliance with international standards availability (YES/NO) |
Yes, the Netherlands follows the OECD Model Tax Convention on Income and Capital. |
|
Applicability |
Dutch taxpayers engaged in cross-border intra-company transactions. |
| Applicability to foreign companies (YES/NO) | Yes, foreign companies operating through branches in the Netherlands. |
| Transfer pricing (TP) principle |
The arm’s length principle applies. |
| OECD transfer pricing methods |
– the comparable uncontrolled price, – resale price, – transactional net margin, – cost plus, – and profit split methods. |
| TP method choice |
The taxpayer chooses the transfer pricing method employed. |
| Documents issuing authority |
The Dutch Tax Authority holds the financial information a taxpayer must prepare for transfer pricing documentation. |
| Language preparation |
Dutch or English. |
| Transfer pricing documentation |
– local file, – master file, – Country-by-Country Report (CbCR). |
| Revenue thresholds |
– EUR 50 million for Dutch companies with consolidated group revenue, – EUR 750 million for multinational companies. |
| Documentation time frame |
The TP documenation must be drafted at the same time as the corporate tax return. |
| Exemptions (if available) |
For small and medium-sized businesses with group revenue below EUR 50 million. |
| Dispute resoltuion options |
Companies are advised to enter advance pricing agreements (APAs). |
| Support in TP regulations (YES/NO) | Yes, companies can rely on our Dutch accountants for assistance in complying with TP regulations. |
Table of Contents
Transfer pricing methods in the Netherlands
The Netherlands applies all the transfer pricing methods that are prescribed by the OECD. At the same time, it may also accept pricing methods that are not included in the OECD Transfer Pricing Guidelines, but only in the situation in which they fall within the scope of the arm’s length principles. As a general rule, the Netherlands adopted the following pricing methods:
- tangible property – in the case of marketing and sales activities, they are remunerated in accordance with the revenues established at a gross margin or at a net margin;
- intangible property – in the case of transactions related to intangible property, it is generally applied the comparable uncontrolled prices; however, the profit-split method can also be applied;
- service transactions – they are remunerated in accordance with the direct costs incurred; they can also be calculated following the transactional net margin method;
- loans and advances – in this situation, the pricing is established following similar instruments.
Law on transfer pricing in the Netherlands
The Dutch transfer pricing (TP) Decree no.2018/6865 (TP Decree) contains the TP legislation, and the Dutch decree DB/2015/462M provides for additional documentation regulations (Documentation Decree).
The arm’s length principle is the foundation for Dutch transfer pricing regulations, which are based on Article 9 of the OECD Model Tax Convention on Income and Capital and nationally implemented in Article 8b of the Wet op de Vennootschapsbelasting 1969.
The arm’s length principle’s premise is that, for tax reasons, organizations should behave toward one another in the same way that independent businesses would behave in like situations.
All Dutch taxpayers, including Dutch branches of foreign corporations, who engage in cross-border intercompany transactions are subject to the TP regulations.
The most recent changes in the legislation related to transfer pricing in the Netherlands were implemented in 2022, and they provide for the inclusion of a guide on financial transactions.
Our accounting firm in the Netherlands is at the disposal of those who are engaged in cross-border operations and need support in respecting the newest TP rules.
New Dutch pricing methods following the OECD rules
Following the new OECD regulations, theDutch Decree stipulates that the actual conduct of the parties can become more important than the contractual terms. Our accounting firm in the Netherlands can offer more details concerning this regulation. Also, it is important to know that risk control functions now have a more important role in the risk analysis of the transfer pricing.
Transfer pricing documents to be drafted by Dutch companies
The consolidated turnover of the multinational group to which the Dutch firm or branch belongs determines the precise criteria for the compilation of transfer pricing documents.
Every Dutch company that conducts business with a related party is required to create paperwork that explains how the transfer prices were determined and supports their at-arms-length status. The administration of the taxpayer must take the documentation into account. There are no rules prescribing the style of this document, but it must contain enough details to let the authorities assess whether the transfer prices used between related parties were applied at arm’s length.
Transfer pricing in the Netherlands depends on various factor, among which the group’s revenues. According to the Dutch legislation, businesses must prepare group master and local files in compliance with BEPS Action 13 if their consolidated group revenues exceed EUR 50 million. The preparation of the transfer pricing paperwork can be done in either Dutch or English, as follows:
- the local file must be drafted in compliance with Dutch laws and regulations and must include details particular to the local entity or entities;
- the master file can be prepared centrally, given that it is created in accordance with BEPS Action 13 and respects the language requirements (translations from English to Dutch or vice versa are also accepted).
Other aspects that should be considered after the introduction of the new regulations are:
- that starting with 2016, the Netherland also introduced a Country-by-Country Report rule for company groups with revenues exceeding EUR 750 million;
- a Dutch company or branch of a foreign company must file the report in the country it operates;
- it is also possible to submit a notification with the tax authority in the respective country if the report is filed in another state;
- the notification must be filed before the end of the respective financial year.
Our accountants can offer more information on the documents to prepare for transfer pricing in the Netherlands.
Penalties for failing to company with Dutch transfer pricing regulations
Failing to respect the rules related to transfer pricing in the Netherlands may attract penalties imposed by the Tax Administration, as follows:
- up to EUR 5.278 for not drafting the local and master file;
- EUR 870.000 for not drafting the Country-by-Country Report or notification;
- a compound interest of 8% will be added to the tax on underreported taxable profits.
Companies operating in the Netherlands are invited to address to our Dutch accounting firm for more details on the tax procedures available under the new Decree regulating transfer pricing following the OECD regulations. Our accountants can offer more details on the pricing methods available for tangible and intangible assets.