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.
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:
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.
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.
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:
Other aspects that should be considered after the introduction of the new regulations are:
Our accountants can offer more information on the documents to prepare for transfer pricing in the Netherlands.
Failing to respect the rules related to transfer pricing in the Netherlands may attract penalties imposed by the Tax Administration, as follows:
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.