The bill containing amendments to the rules governing transfer pricing documentation including Country-by-Country Reporting, Master File and Local File has been enacted and is effective as of January 1, 2016.
The bill which includes new standardized documentation requirements to be included in the Corporate Income Tax Act 1969 (“CITA 1969”) was passed in December, 2015. By means of the bill the Netherlands implements the OECD’s “Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 – 2015 Final Report”. The new requirements constitute an enlargement of the current legal requirements under Section 8b CITA 1969. We refer to our memorandum dated September 17, 2015 for more detailed information on the new legislation. In addition, the Regulation governing Additional Transfer Pricing Documentation Requirements was published on December 30, 2015. This Regulation contains instructions for the further elaboration of the additional documentation requirements for multinational enterprises, including a Model Template for the Country-by-Country Report (CbC Report), a Model Master File and a Model Local File.
Observations by Meijburg & Co
With the enactment of the new transfer pricing documentation rules, groups with cross-border operations need to act in time to comply with the new regulations. For companies that are part of a group with a minimum consolidated turnover of EUR 750 million, this means that a notification needs to be sent to the Dutch Tax Authorities (“DTA”) by December 31, 2016, to inform the DTA which group company will be filing the CbC Report. If the fiscal year of the group commences on January 1, 2016, the group companies will need to have filed their CbC Report by December 31, 2017. Penalties will be imposed in instances of intentional non-compliance or “serious misconduct” of the reporting entity regarding its obligation to file the CbC Report, with the penalty amounting to a maximum of EUR 20,250 in addition to possible criminal prosecution.
Furthermore, all group entities that are tax resident in the Netherlands and that are part of a group with a minimum consolidated turnover of EUR 50 million, need to have a Master File and Local File in their administration at the time of filing their tax return. Non-compliance with the Master File and Local File documentation requirements would result in a reversal of the burden of proof.