Results of research into international tax rulings published | Deloitte Netherlands

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Results of research into international tax rulings published

The State Secretary for Finance informed the House of Representatives about the results of a research by the Tax Administration into compliance with internal procedures for issuing tax rulings with an international dimension.

22 February 2018

Background

The State Secretary for Finance announced an internal research into the Tax Administration’s international tax ruling practice in the autumn of 2017. This happened on the back of press reports unveiling non-compliance with internal procedures by Tax Inspectors when issuing tax rulings with an international dimension. On 18 February 2018, he informed the House of Representatives about the results of this research. On top of that, the State Secretary announced a revision of the existing tax ruling practice.

Research results

The Tax Administration examined compliance with the applicable procedures for a total of 4,462 tax rulings with an international dimension. For six out of the 3,101 tax rulings issued by the Tax Administration’s APA/ATR team, the researchers were unable to establish whether the correct procedures had been applied.

The 1,361 tax rulings not issued by the APR/ATR team turned out to violate procedural regulations more often. The ruling requests relating to 63 tax rulings had incorrectly not been relayed to the APA/ATR team. In addition, for several tax rulings no verifiable recordings substantiating proper application of the four-eye principle were available - e.g., because a signature by a second authorised officer was lacking. The substantive correctness of the tax rulings that violated internal procedures has also been tested. Two tax rulings appeared to be incorrect from a tax technical perspective. The same likely applies to three other tax rulings. These five tax agreements will be cancelled or amended.

The State Secretary also indicated that another research has been started by an independent committee of external experts. This committee will carry out a substantive research into the tax rulings which the APR/ATR team issued in 2017. The results of this research will be added as appendix to the next semi-annual report by the Tax Administration.

European guidelines

Apart from compliance with internal procedures, the researchers also focused on compliance of the Dutch tax ruling practice with the guidelines of the EU Code of Conduct group. This research showed nearly all of the tax rulings issued by the APA/ATR team to be in line with these recommendations. The tax rulings issued outside the APA/ATR team were less compliant. As a result, the procedures for rulings with an international dimension will be tightened, particularly in terms of documentation requirements and the performance of precedent controls. Transparency about the contents of tax rulings will also be enhanced. Last year, the APA/ATR practice published a memorandum focusing on much-used forms and examples of APA and ATR tax agreements. On top of that, the APA/ATR team will publish an annual report.

Revision of ruling practice

To continue to guarantee the quality and solidity of the Dutch tax ruling practice going forward, the State Secretary plans to revise both the process of issuing and the contents of tax rulings. He also believes more central coordination of tax rulings with an international dimension is required. As regards the substance of tax rulings, the State Secretary wishes to reconsider the relevance of providing advance certainty to companies that only make a limited contribution to the real economy. In this context, he also considers tightening substance requirements. Yet he warned that limiting the scope of certainty will lead to more time-consuming discussions when assessing tax returns. On top of that, no information is exchanged on situations in which no tax rulings are issued with foreign countries.

An advisory group of independent experts will be installed to shape the tax ruling practice revision, and consultations will be held. The ambition is to introduce the new tax ruling practice on 1 January 2019.


Source: Letter by the State Secretary for Finance of 18 February 2018, 2018-0000024590

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