FS Tax Newsletter | May 2023

May 11, 2023

Dear FS professional,

The summer holiday period is fast approaching and as this will be our last FS Tax Newsletter before the summer holidays begin. We would like to update you on the developments we have been monitoring over the past few months, so that you can start the summer well-informed.

For other tax-related topics not included in this FS Tax Newsletter, please visit our website.

If you would like to know more about the matters addressed in this newsletter, please contact us.

Niels Groothuizen, Partner, Financial Services Tax Group

1. Internet consultation on the abolition of the real estate FBI, changes to the VBI regime and changes in the definition of a mutual fund
2. Clarification of the anti-transfer pricing mismatch rule in respect of capital contributions
3. Interest on tax due charged on corporate income tax assessments to remain at same rate for the time being
4. Clarity and lack of clarity after new Dutch Supreme Court judgment on Section 10a CITA 1969
5. EU VAT rules for platform operators facilitating digital services are valid
6.Tax changes announced in the 2023 Spring Memorandum
7. 2023 Guidelines on Mandatory Disclosure Rules (DAC6) published
8. Changes to VBI regime, abolition of open limited partnership and revision of qualification policy postponed for one year

1. Internet consultation on the abolition of the real estate FBI, changes to the VBI regime and changes in the definition of a mutual fund

In our MTN of December 15, 2022 we informed you about the government’s response to the report presented by SEO Amsterdam Economics on the effectiveness and efficiency of the regimes for fiscal investment institutions (fiscale beleggingsinstellingen; FBIs) and exempt investment institutions (vrijgestelde beleggingsinstellingen; VBIs). The following three measures were announced:

As of January 1, 2025 FBIs will no longer be allowed to directly invest in property.
As of January 1, 2024 only investment institutions that have a license from and fall under the supervision of the Netherlands Authority for the Financial Markets and the Dutch Central Bank will qualify as a VBI. In other words: the VBI regime will be abolished for family-held VBIs.
As of January 1, 2024 the conditions governing (open) mutual funds will be amended.

The new rules primarily affect institutional investors (FBI and mutual fund), (listed) real estate funds (FBI) and high-net-worth families (VBI and mutual fund). The Dutch Ministry of Finance has launched an internet consultation on a bill containing changes to the fiscal and the exempt investment institution, and a change in the definition of a taxable mutual fund. The draft bill contains accompanying measures to avoid the (immediate) levying of corporate income tax, personal income tax and real estate transfer tax.

For more information on this matter, please follow this link or contact Michael van Gijlswijk, Jennifer Evers, Maarten Merkus or Jeroen Bruggeman.

2. Clarification of the anti-transfer pricing mismatch rule in respect of capital contributions

On January 24, 2023 Deputy Minister of Finance Mr. Van Rij clarified in a policy statement the scope of one of the measures to combat transfer pricing mismatches (Section 8bd Corporate Income Tax Act 1969; ‘CITA 1969’). Based on a literal reading of the text, an asset that is, for example, acquired by means of a capital contribution from an exempt affiliated entity or from an affiliated entity not subject to a profit tax, must be stated on the balance sheet at nil. However, that is not always the aim.

In light of the spirit and intent of the measures to combat transfer pricing mismatches, the Deputy Minister does not find the outcome that follows from a literal interpretation of the legislative text of Section 8bd CITA 1969 in a situation such as the above appropriate. That is why Section 8bd CITA 1969 is disregarded if a taxpayer acquires by means a capital contribution (or one of the other transactions referred to in Section 8bd CITA 1969) an asset from an affiliated entity that is not subject to a profit tax. This is subject to the condition that both the civil-law structure of the capital contribution and the financial statements of the transferring party and the taxpayer use the fair market value for the capital contribution. Financial statements are understood as: the financial statements prepared in accordance with Title 9, Book 2 of the Dutch Civil Code or the Provinces and Municipalities (Budgets and Accounts) Decree, or similar (foreign) statutory regulations.

For more information on this matter, please follow this link or contact Otto Marres, Fred van Horzen or Michael van Gijlswijk.

3. Interest on tax due charged on corporate income tax assessments to remain at the same rate for the time being

In our MTN of February 3, 2023 we informed you about the statutory increase in the rate used for charging interest on tax due on corporate income tax and (interest and royalty) withholding tax assessments. This rate was to increase from 8% to 10.5% with effect from March 1, 2023.

In his letter to the Lower House of Parliament dated February 23, 2023, the Deputy Minister of Finance announced that he intends to review the interest on tax due rates during the comprehensive consultations on the Spring Memorandum. Therefore, for the time being the rate for interest on tax due charged on corporate income tax and withholding tax assessments will not be increased but will remain at 8%.

In order to keep the interest on tax due at 8%, the legislation will have to be amended with retroactive effect. However, during the period from March 1, 2023 until the date the legislation is amended, the Dutch Tax and Customs Administration will use the 10.5% rate for any interest on tax due it must pay to taxpayers. Unfortunately, there are only very few situations where the Dutch Tax and Customs Administration actually pays interest on tax due.

For more information on this matter, please follow this link or contact Olaf Leurs or Tom Noë.

4. Clarity and lack of clarity after new Dutch Supreme Court judgment on Section 10a CITA 1969

On Friday, March 3, 2023 the Dutch Supreme Court rendered a new judgment (only available in Dutch) on the interest deduction limitation of Section 10a Corporate Income Tax Act 1969 (‘CITA 1969’). The Supreme Court ruled, among other things, that if there is a business-motivated ‘10a transaction’, the associated debt is, in principle, also business-motivated if the relevant funds were not diverted. With regard to this diversion of funds, the Supreme Court ruled that this cannot, in principle, be the case if the related debtor fulfills a pivotal financial function within the group. In so ruling, the Supreme Court has provided clarity and ensured that the deduction of interest will not typically be limited in situations where there are active group financing companies. As a final point, the Supreme Court also ruled on the application of fraus legis (evasion of law) in cases where a taxpayer successfully invokes the double business motivation test of Section 10a(3)(a) CITA 1969. In doing so, the Supreme Court did not explicitly indicate how that decision compares to earlier case law.

For more information on this matter, please follow this link or contact Otto Marres or Luc van der Voort.

5. EU VAT rules for platform operators facilitating digital services are valid

On February 28, 2023 the Court of Justice of the European Union (‘CJEU’) published its judgment in the Fenix case (C-695/20). The CJEU ruled that the EU’s VAT rules for platform operators facilitating digital services are valid.

The EU VAT Implementing Regulation (in conjunction with the EU VAT Directive) contains a deeming provision for platform operators facilitating digital services. Where the conditions of this deeming provision are satisfied, the platform operator is deemed to buy the digital services from the service providers (Creators) and deemed to resell such services to the service recipients (Fans). Fenix challenged the validity of this deeming provision laid down in the EU VAT Implementing Regulation.

The CJEU has now made clear that the deeming provision for platform operators facilitating digital services is valid. Nonetheless, platform operators must still assess whether they can rebut the presumption that this deeming provision applies – by reference to authorizing the charge to the customer, authorizing the delivery of services and/or setting the general terms and conditions of the supply. While this may be challenging in practice, given the typical involvement of platform operators in these elements, in our view there should still be scope to rebut the presumption.

For more information on this matter, please follow this link or contact Max van de Ven, Lennert Janssen or Valentijn Kuperus

6. Tax changes announced in the 2023 Spring Memorandum

The 2023 Spring Memorandum was published on Friday, April 28, 2023. In this Memorandum, the government announces a number of proposed tax changes. The 2023 Spring Memorandum provides an outlook of the tax measures that are planned in the short and somewhat longer term. Property owners in particular will be taxed much more heavily. Substantial interest holders will be delighted that the business succession schemes will continue to exist and that a number of technical points will be cleared up. Box 3 remains an enduring issue. As long as a tax based on actual return has not been introduced and the difference between the tax boxes has not been mitigated, tax-driven behavior will be displayed and the tax authorities will want to take action against this, or taxpayers will litigate. It is also to be appreciated that adjustments are being made quickly and a number of matters are being arranged. In particular, making mutual receivables and payables between partners tax-exempt prevents many discussions. Finally, we note that the government is still referring to a simplification of the tax system, but that the announced measures will most likely only make it more complicated.

For more information on this matter, please follow this link or contact Michael van Gijlswijk.

7. 2023 Guidelines on Mandatory Disclosure Rules (DAC6) published

As of July 1, 2020 the Mandatory Disclosure Rules (EU DAC6 Directive) took effect in the Netherlands. During the drafting of DAC6 it was acknowledged that it can be difficult in practice to establish whether or not specific arrangements are reportable.

On April 28, 2023 an updated version of the Guidelines on Reportable Cross-border Arrangements (hereinafter: Guidelines) were published to replace an earlier version dating from 2020. The updated Guidelines include several substantive changes compared to the earlier version. The hallmarks are discussed using 32 examples.

The Guidelines offer insight into how the DTCA should interpret DAC6. However, the Guidelines present the interpretation of the Deputy Minister of Finance, which does not rule out that other interpretations are possible.

For more information on this matter, please follow this link or contact Lieke Mutsaers, Tom Noë or Pim Jansen.

8. Changes to VBI regime, abolition of open limited partnership and revision of qualification policy postponed for one year

On Monday, May 8, 2023 Deputy Minister of Finance Mr. Van Rij sent the Second tax Policy and Implementation Agenda to the Upper and Lower Houses of Parliament. The agenda does not contain much that is new compared to the 2023 Spring Memorandum (see our memorandum of May 4, 2023), What is new is that the government has indicated that it intends to postpone by a year, i.e. thus to January 1, 2025, the announced changes to the exempt investment institution (vrijstelde beleggingsinstelling; VBI) regime and the open mutual fund, as well as the abolition of the open limited partnership and the revision of the tax qualification policy for legal forms.