Dutch position on implementation deadline ATAD-2


Dutch position on implementation deadline ATAD-2

25 January 2017

Answering on questions from the Dutch Parliament, the State Secretary of Finance reiterated that he favours an extended implementation deadline for ATAD-2, without mentioning a specific date.

In response to questions from the Dutch parliament, the State Secretary of Finance reiterated on 19 January 2017 that the Netherlands favors an extended implementation period for proposed changes to the EU anti-tax avoidance directive (ATAD), without mentioning a specific deadline. An extended transition period would provide countries (including both EU member states and non-EU countries (third countries) potentially affected by the amendments) more time to update their domestic laws in line with the directive, in addition to granting companies in affected countries more time to update their corporate structures accordingly.


Under the ATAD, the EU member states have agreed to harmonize their domestic tax laws to avoid hybrid mismatches in intra-EU situations. On 2 December 2016, the European Commission proposed an amendment to the ATAD that would extend the anti-hybrid-mismatch rule to third-country situations (ATAD 2). Under the proposal for the amendment, EU member states would be required to implement the rules for both intra-EU and third-country situations into their domestic tax law by 1 January 2019.

Extension of implementation period

It was expected that the amendment to the ATAD would be approved at the EU Economic and Financial Affairs Council meeting on 6 December 2016. The UK, however, advocated for two exceptions to the anti-hybrid rules for the financial sector. As these still are being discussed, no agreement on ATAD 2 was reached.

During the negotiations at the meeting, the Netherlands committed itself to preventing hybrid mismatch arrangements in both non-EU and EU situations. The Netherlands did request a transition period for the new rules. Following the negotiation parameters that the Netherlands was granted by the Dutch parliament, no specific deadline for the transition period (such as the 1 January 2024 deadline that had been discussed) was requested—the Netherlands simply requested an extended implementation period.

Impact of amended ATAD

According to the Dutch government, a transition period would be needed to implement the ATAD 2, because of the impact of the proposed extension of the anti-hybrid rules in the ATAD to third-country situations. Implementing the proposed amendments would mean that the Netherlands, in covered situations, would have to tax profits in some cases where the corresponding value creation occurred in third countries (e.g. because the development of the relevant intellectual property was carried out there). In principle, such taxation would infringe the internationally accepted principle that profits should be taxed where the value was created.

For this reason, the Dutch government has taken the position that, as a starting point, the third countries that would be affected by the proposed amendments to the anti-hybrid rule should be granted sufficient time to amend their domestic rules to effectuate the consistent allocation of taxing rights in such circumstances. Thereafter, the EU member states could allocate taxing rights for these types of income accordingly (or deny deductions). Since third countries likely would be unable to amend their laws before 1 January 2019, a longer transition period would be required. A longer transition period also would provide affected companies more time to amend their corporate structures in line with the ATAD 2. Since domestic legislative processes would take time to amend a country’s national laws to implement the ATAD 2 and the relevant administrative processes would have to be amended as well, it can be expected that affected companies would want to wait until these processes are complete to obtain certainty on whether their updated structures are correct.

Next steps

It remains to be seen what the EU member states will agree upon regarding the ATAD 2. The Maltese Presidency of the EU Council is expected to present a new proposal, taking into account the UK’s requests for the financial sector and the Netherlands’ request for a potential transition period.

Source: Kamerstukken II 2016/2017, 34 604, nr. 9.

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