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Dutch transfer pricing documentation requirements – An overview

March 2016

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Contents

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Dutch transfer pricing legislation

New Dutch transfer pricing documentation rules

How can RSM help?

About RSM

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Dutch transfer pricing legislation

Transfer pricing documentation requirements:

• According to Article 8(b) of the Dutch Corporate Income Tax Act (“CITA”), 1969, Dutch taxpayers are required to make available the following:

• Certain information regarding inter-company

transactions • The relationship between affiliated companies involved

in the transaction • How inter-company prices are calculated

• Based on the above transfer pricing documentation, the Dutch tax authorities should be able to determine whether the relevant inter-company transactions are carried out on arm’s length terms

• The Dutch transfer pricing legislation does not give a clear indication as to exactly what the minimum requirements are in terms of transfer pricing documentation. However, in the explanatory memorandum on the legislation, reference is made to the OECD Guidelines in this respect

• The Dutch transfer pricing decree of 14 November 2013, no. IFZ 2013/184M, also provides some guidance on the documentation that should be maintained and the option for taxpayer to apply the “EU transfer pricing documentation” in accordance with the EU Code of Conduct on transfer pricing documentation

• However, on a best practices perspective, it is understood that the documentation should include the following:

• A summary of relevant intra-group transactions • A functional analysis • An industry analysis • A summary of the transfer pricing methods and

margins used including evidence that the methods have resulted in an arm’s length outcome

• Details on companies strategies including critical assumptions

• Intra-group arrangements including critical assumptions

New transfer pricing documentation rules:

• BEPS Action Plan 13 on “Transfer Pricing Documentation and Country-by-Country Reporting” requires Multinational Enterprises (“MNEs”) that meet certain consolidated turnover thresholds to prepare the following three documents (i.e. the so called 3 tiered approach):

• A master file

• A local file

• A country-by-country report (“CbCR”)

• The 3 tiered (“BEPS”) approach has been endorsed by the Netherlands and was introduced in the Dutch CITA in Articles 29b through 29h as per January 1,2016

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BEPS Action 13 in the Netherlands: New Dutch transfer pricing documentation Rules

Transfer pricing documentation requirements – Master File and Local File:

• EUR 50 million threshold

• Master File should contain the following information:

• Information regarding MNE Group’s global business

• The nature of its activities and its general transfer pricing policy

• Its worldwide allocation of income and economic activities

• Local File should contain the following information:

• Information that is relevant for an analysis of the transfer pricing terms and conditions

applicable on transactions between the tax payers and Group entities in other states

Country-by-Country Report:

• EUR 750 million threshold

• The CbCR contains

• An overview per country i.e. aggregate information relating to the amount of revenues, profit

(or loss) before income tax, income tax paid, number of employees etc.

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BEPS Action 13 in the Netherlands: Important terms of the Master File

• EUR 50 million threshold

• Master File should contain information (blue-print) regarding the following:

• The MNE Group’s global business

• The nature of its activities and its general transfer pricing policy

• Its worldwide allocation of income and economic activities to support tax administrations to

assess whether substantial transfer pricing risks exist

• Should be available in the taxpayer’s administration when tax return is filed for the relevant year

• May be prepared in either Dutch or English

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BEPS Action 13 in the Netherlands: Important terms of the Local File

• EUR 50 million threshold

• Should contain information related to:

• Description of management structure, reporting lines, description of key local individuals

• Description of local business, business strategy and competitors

• Analysis of controlled transactions, including comparability and functional analyses, selection

of transfer pricing methods and tested parties, amount of intra-group payments and receipts

of each category of transaction, and economic analyses; and

• Information and allocation schedules showing how the data used in applying the transfer

pricing methodology ties to annual financial statements

• Should be available in the taxpayer’s administration when tax return is filed for the relevant year

• Needs to contain all the companies that operate in the country

• May be prepared in either Dutch or English

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BEPS Action 13 in the Netherlands: Important terms of the CbCR

• EUR 750 million with an ultimate parent entity of Dutch tax residency

• CbCR contains a breakdown of revenues between related parties and unrelated parties, profit

before tax, income tax (paid and accrued), capital , number of employees, tangible assets

(excluding cash)

• The CbCR requirement applies to Dutch headquartered Groups, but could also apply to Groups

which are headquartered in another jurisdiction in the following specific circumstances:

• The country where the ultimate parent company is a resident has not introduced similar

legislation with regards to CbCR; or

• There is no agreement for the exchange of information between this country and the

Netherlands; or

• There is a systematic negligence in the exchange of CbCR between this country and the

Netherlands

• Submission within 12 months after relevant year end

• The CbCR may be prepared either in Dutch or English

• Non-compliance may lead to a potential penalty varying from EUR 8.100 (unintentional act) to

EUR 20.250 (serious misconduct) in addition to a possible imprisonment in the event of serious

misconduct

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Action 13 in the Netherlands: Summary

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Master file Local File CbCR

• Organizational structure

• Description of company

activities

• Intangibles

• Financial activities within

the Group

• Financial and tax position of

the MNE Group

• List of important

agreements, intangibles

and transactions

• Financial information

regarding specific

transactions

• Comparability analysis

• Selection and application of

the most suitable transfer

pricing method

• Economic analysis

(benchmark)

• Revenues (related / third

parties)

• Profits before tax

• Cash tax paid

• Income tax accrued

• Stated capital

• Accumulated earnings

• Number of personnel

• Tangible assets other than

cash and cash equivalents

• Description of every Group

entity

Consolidated revenue

> EUR 50,000,000

Consolidated revenue

> EUR 50,000,000

Consolidated revenue

> EUR 750,000,000

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How RSM can help?

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Preparation of master file for the MNE Group

Preparation of local file template for one Group entity (for

instance, Netherlands) to be used as a template for other

countries where MNE Group operates

Tailoring the local file template prepared for the above Group

entity into local country files for remaining countries where

MNE Group operates

Being sparring partner for providing assistance in the

preparation of CbCR for the MNE Group

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Your trusted RSM advisors

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Mario Van Den Broek Partner, Transfer Pricing Leader

Amsterdam & New York T: + 1 914 708 8609 E: mvdbroek@rsmnl.nl mvdbroek@rsmnl.nl

Rishi Sapra Transfer Pricing Manager

Amsterdam T: + 31 (0) 6 4757 0983 E: rsapra@rsmnl.nl

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RSM International

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