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The Netherlands follows the OECD advise to implement new legislation with respect to the BEPS (Base Erosion and Profit Shifting) project. Up to 2016 only a general provision on TP was included in the Dutch corporate tax act, but as of January 1, 2016 an entirely new chapter has been added.
Now documentation obligations vary from the consolidated group turnover if a Dutch company is considered (a member of) a multinational enterprise (MNE).
More than 50 million euro group turnover
If a Dutch company forms part of an international group with a consolidated turnover of more than 50 million euro it will be required to prepare and keep a Master File and a Local Country File in its administration.
The Master File should provide an overview of the MNE as a whole, including the nature of its activities, its general transfer pricing policy and its global allocation of income and economic activities.
The Local Country File subsequently needs to include specific information that is relevant for the transfer pricing analysis in respect of intercompany transactions entered into by the Dutch company.
More than 750 million euro group turn over
If a Dutch company is an Ultimate Parent Entity of a MNE with more than 750 million euro group turn over, the Dutch entity is required to submit a Country by Country Report to the Dutch tax authorities within 12 months after the end of the fiscal book year. The Country by Country (CbC) Report should contain an overview per country of information relating to the amount of revenue, profit or loss before income tax, income tax paid, number of employees , the tax jurisdiction of each group company, the nature of the main activity of each group company etc.
If the Dutch company forms a part of a MNE with an Ultimate Parent entity that is resident outside the Netherlands, the Country by Country Report of the Ultimate Parent entity is sufficient if the country in which the Ultimate Parent entity is a tax resident does have an agreement regarding the exchange of information with the Netherlands.
Dutch entities which are subject to the CbC reporting obligations should nevertheless before the end of the fiscal book year notify the Dutch tax authorities which entity within the group will file the CbC-report. Consequently for book years starting January 1, 2016 the deadline is December 31, 2016! However the Dutch tax authorities granted recently a one time extension up to September 1, 2017.
If the Dutch company does not fulfill the above obligations or does not fulfill these obligations timely severe penalties will be imposed, which in certain situation could amount to euro 20,500.