The Netherlands should consider adopting new tax provisions to counterbalance the increased tax burdens placed on companies from OECD/G20 base erosion and profit shifting (BEPS) plan measures, State Secretary of Finance Eric Wiebes said in a letter to the Dutch House of Representatives.
“I would like to explore, in consultation with the House and key stakeholders, how we can ensure that after the BEPS measures have been introduced, the Netherlands remains attractive to head offices and other companies performing real economic activities,” Wiebes said the letter, dated October 5, which was translated into English and placed on the government’s website today.
Consideration should given to “lowering the headline rate of corporation tax, changing the corporation tax rate structure, a separate box within the corporate income tax regime, changes to dividend withholding tax, or a combination of these measures,” Wiebes said.
Wiebes said that the government will follow through on earlier promises to use the funds made available from BEPS plan limits on The Netherlands’ innovation box to improve the country’s tax offerings.
Calling the publication of the BEPS reports a “milestone in international tax law,” Wiebes said that The Netherlands will immediately adopt the minimum standards for preventing treaty abuse agreed to in the BEPS plan. The government will also seek to adopt the BEPS recommendations on permanent establishments in action 7 when negotiating with tax treaty partners, he said.
On the other hand, Wiebes recommended that The Netherlands not adopt unilateral measures implementing BEPS work on hybrid mismatch arrangements, controlled foreign corporation (CFC) rules, and interest deduction limits.
These measures will only be effective if they are addressed on a multilateral or EU level. Moreover, if adopted unilaterally, the measures would create competitive disadvantages, he said.
Wiebes noted that the EU Commission is attempting to write binding rules on CFCs, interest deduction limits, hybrid mismatches, and permanent establishment as a part of the first phase of its introduction of the common consolidated corporate tax base.
“I share the Commission’s ambition to pursue these matters and draw up binding rules on them,” Wiebes said. “This should be the limit of harmonisation and there is no need to strive for consolidation,” he added.
Wiebes also said The Netherlands is actively involved in developing the multilateral instrument to implement the treaty-related BEPS outcomes.
He also said the government will start exchanging information on tax rulings on the basis of the OECD standard in 2016. The Netherlands already meets the minimum standard for dispute resolution, as specified in action 14, he said.
Wiebes also noted that the goverment has presented legislation to Parliament, which beginning January 1, 2016, would implement country-by-country reporting consistent with action 13 in The Netherlands.
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