The Dutch ruling practice for tax rulings with an international character has been one of the cornerstones of the Dutch investment climate for a period spanning more than 50 years. Often tax legislation contains vague language and ambiguous terms increasing the need for advance consultation of the competent tax authorities and binding agreements often referred to as ‘tax rulings’. What the public opinion often tends to forget is that such rulings are (or at least should be) fully in line with the applicable tax laws in force. To avoid ‘shopping practices’ the ruling practice was concentrated in a specialized team in Rotterdam. Both tax payers and tax authorities were generally pleased with the way this advance ruling practice worked in practice.

More recently, the Dutch tax ruling practice was heavily criticized. This is partially due to public statements of the EU Commission that certain rulings were in their opinion not in line with the applicable laws (Ikea, Starbucks). Another reason is the changed perception in society what tax payers should do and to what extent countries should facilitate such behavior. This in particular applies to artificial structures involving Dutch companies with minimal substance in the Netherlands, often referred to as ‘letterbox companies’. This has already led to changes in ruling policy in recent years. In letters dated 22 November 2018 and 23 April 2019, the State Secretary of Finance announced a thorough revision of the ruling practice. The new rules will entry into effect on 1 July 2019.

Dutch Tax Ruling Practice as of 1 July 2019


A Dutch tax ruling can in principle be granted for transactions with an international character to the extent it relates to Dutch Corporate Income Tax, Dutch Dividend Withholding Tax or a Dutch treaty for the elimination of double taxation with respect to taxes on income and capital . A tax ruling could for instance deal with the following topics:

  • the application of the Dutch participation exemption for participations in entities situated outside the Netherlands;
  • the qualification of hybrid loans or hybrid entities in international structures;
  • if a foreign entity has a permanent establishment in the Netherlands;
  • what assets and/or risks must be allocated to the permanent establishment in the Netherlands;
  • if a cooperative must withhold tax on dividends;
  • if an entity is exempted from withholding tax on dividends;
  • the application of the principle purpose test and main purpose test in Dutch tax treaties;
  • the conclusion of an advanced pricing agreement, determining the at arm’s length remuneration for a Dutch taxable entity.

Economic Nexus

The most important change in the ruling practice as of 1 July 2019 is the introduction of the requirement for Dutch companies to have an ‘economic nexus’ in the Netherlands in order to obtain a tax ruling. This new concept will replace the current ‘safe harbor’ criteria used to establish whether a company has sufficient substance. Economic nexus concerns operational activities that are performed for the risk and account of the company in the Netherlands. Such activities should be in line with the company’s function within the group. There should be sufficient personnel relevant for the tasks performed in the Netherlands and the number of employees should be proportional to the overall employees available within the group. The level of costs should also be proportional to the activities carried out within the group.

The extent to which presence in the Netherlands is required should not be underestimated. An example which exemplifies this is a large multinational which is envisaging to set up a financial department in the Netherlands with 2 fulltime employees through which most financial transactions in the group are routed, in a situation where the group has a treasury department of 75 employees. It is stated that a ruling request will be denied due to lack of sufficient economic substance and the fact that it is likely that the principal purpose of the structure is to avoid foreign withholding taxes. Another example states that a Dutch sub holding company should also demonstrate its active involvement in the management of its participations.


Furthermore, a ruling is no longer granted when (i) the sole or decisive motive of the transaction related to the ruling is to avoid Dutch or foreign taxes or (ii) the transaction is directly connected to an entity situated in a country listed as a non-cooperative, low-tax jurisdiction. For 2019, the following 21 countries are considered to be non-cooperative and/or low-taxed:

  • American Samoa
  • Anguilla
  • The Bahamas
  • Bahrain
  • Belize
  • Bermuda
  • The British Virgin Isl.
  • The Cayman Isl.
  • Guam
  • Guernsey
  • The Isle of Man
  • Jersey
  • Kuwait
  • Qatar
  • Samoa
  • Saudi-Arabia
  • Trinidad and Tobago
  • The Turks and Caicos Isl.
  • Vanuatu
  • The United Arab Emirates
  • The US Virgin Isl.

A ruling is not even granted when a transaction with an entity situated in the above mentioned countries is based on sound business reasons.

Publication of Anonymized Summary

To increase transparency, the Dutch tax authorities will publish an anonymized version of each tax ruling dealing with international affairs. The summary consists of the motive for obtaining a ruling, the facts related to the ruling, a legal framework, the considerations and a conclusion. In view of the legal obligation to treat information confidential, care will be taken to ensure that the summaries published cannot be traced back to individual tax payers.

Ruling for potential foreign investor

A foreign (i.e. non-Dutch) entity with the intention to invest in the Netherlands may obtain a ruling as a potential foreign investor. The ruling is not limited to the Dutch corporate income tax and dividend withholding taxes, but may also include transactions related to individual income tax, wage taxes and value added taxes. This ruling is only granted when (i) the potential investor’s central management is not located in the Netherlands, (ii) the potential investor does not have undertaken activities, other than auxiliary, in the Netherlands before and (iii) the investment creates employment in the Netherlands.

Team International Tax Certainty

To ensure the quality and uniformity of the rulings issued, all international rulings also need to be signed-off by a newly established team called the Team International Tax Certainty. The Dutch tax authorities will closely examine the principal purpose of the specific structure for which a ruling is requested. A ruling will be denied if the sole or decisive motive is to avoid Dutch or foreign taxes.

Consequences of the New Ruling Practice

The question is how the international tax practice will be affected by these measures. Although existing rulings and situations where no ruling has been or will be requested will not be directly affected, the expectation is that international groups with a ‘letterbox presence’ will no longer remain present in The Netherlands. For companies with a real presence the Netherlands however remain an attractive location for holding companies, for tax and non-tax reasons.

Author: Robert de Vries