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September 26, 2017

The Netherlands Adopts Additional Country-by-Country Reporting Rules and Transfer Pricing Documentation (article)

Additional Dutch Country by Country Reporting Rules (CBCR) and Transfer Pricing (TP) Documentation were adopted by the Dutch Senate on May 23, 2017. These rules took effect on June 5, 2017 and will apply to reporting for fiscal years that commence on or after Jan. 1, 2016. See the summary of these new rules and how they may impact your business below.

The Incomplete Country-by-Country Report (Secondary Filing)

The new rules offer the possibility to (i) designate one group entity within the European Unity (EU)  as the reporting entity and to (ii) allow a designated Dutch group entity to file an incomplete Country-by-Country report with all the information at its disposal (the “secondary filing mechanism”).

This incomplete Country-by-Country report will not automatically be exchanged with other EU or non-EU countries Therefor, it is not possible for an EU group entity to prepare the incomplete Country-by-Country report and act as the ‘designated group entity’ for EU purposes. The notification about the incomplete Country-by-Country report will be exchanged with all EU Member States.

Permanent Establishment as Surrogate Parent Entity or Designated Group Entity?

The Dutch Ministry of Finance recently clarified that a permanent establishment qualifies as a group entity. Because of this, there must be a Master and Local File where the Group has a consolidated group turnover of EUR 50 million or more (see below).

However, the new rules state that a permanent establishment situated in the Netherlands cannot act as the surrogate parent entity or the designated group entity.

Expansion of Penalty After Notification

The penalty provision for not complying with the reporting requirements for the Country-by-Country report is expanded to cover the notification. This takes effect as of June 5, 2017 and thus will not be applied retroactively.

Under the new rules, the maximum amount of the potential pecuniary penalty has been increased from €20,250 to €820,000. 

Master File and Deviating Reporting Fiscal Years

In his April 12, 2017 letter, the Dutch State Secretary for Finance confirmed that if the reporting fiscal years for the foreign ultimate parent entity and for a Dutch group entity deviate, the reporting fiscal year of the ultimate parent entity can be used for the Master File. This was already explicitly noted as law for the Country-by-Country report.

The Local File will continue to cover the reporting fiscal year to which the Dutch corporate income tax return relates.

The Country by Country Rules discussed above are in addition to the Dutch Transfer Pricing rules that became effective on Jan. 1, 2016. These TP are incorporated in articles 29b through 29h of the Dutch Corporate Income Tax Act 1969. 

The new TP rules include the following compliance measures:

  1. International Groups with their head office in the Netherlands and a consolidated turnover exceeding EUR 750 million must submit a CBCR file along with their annual Dutch corporate income tax return. The CBCR file must include descriptions of several indicators (such as turnover, profit, paid taxes, and employees) per country.

    The Dutch constituent entity of the multi-national enterprise group must notify the Dutch tax authorities by filing the CBCR notification before the last day of their reporting fiscal year at the latest.

  2. International Groups with cross-border operations and a consolidated group turnover of €50 million or more must expand their transfer pricing (TP) documentation in order to comply with the new Dutch and international requirements.

Essentially, this means that the Netherlands follows the proposed guidance of OECD BEPS Action 13 documentation requirements regarding the master file and local file concept for multinationals enterprises (MNE’s). Groups that have a subsidiary or permanent establishment abroad qualify as a MNE.

It is noteworthy that a benchmarking study will be required for Groups with a world-wide consolidated turnover exceeding EUR 50 million. Furthermore, a Ministerial Decree provides additional rules regarding the contents of a Master File and a Local (i.e. country specific) File.

Note that the Group turnover threshold amounts consist of the total amount increased based on revenues received due to sale of inventory, properties, services, royalties, interest, premiums, and other amounts.
See the comparison between the previous TP rules and new TP rules effective Jan. 1, 2016 in regard to the preparation of the Master and Local File.

Previous TP Rules

TP Rules as of 1 January  2016

Transfer Pricing Documentation
A statutory obligation to prepare and keep transfer pricing documentation applies. However, there is no exhaustive list of the categories of information that should be included in the transfer pricing documentation as the information required will depend on the specific case. Non-compliance with the transfer pricing documentation requirements can result in the burden of proof shifting to the taxpayer. An important and new requirement is that the master file and the local file must be part of the Dutch entity’s administration prior to filing the corporate income tax return. This is a major change from the current practice which requires the taxpayer to provide transfer pricing documentation within two months after a formal request has been issued by the Dutch Tax Administration. Noncompliance with the documentation requirements results in the reversal of the burden of proof and may constitute an offence under Dutch criminal law. It is clear that the master file should also include a Transfer Pricing Policy and worldwide allocation of the Group’s income.
Deadline to Prepare Documentation
Upon request of the tax authorities, the taxpayer must within eight weeks provide the required information. In case of complex transactions the deadline may be extended to three months. The annual corporate income tax return must be filed 5 months after the preceding financial year is closed. Therefore, the 2016 corporate income tax return must be filed before June 1, 2017 unless an extension of time for filing is granted.

In Summary

For tax years 2016 and onwards, a Dutch taxpayer’s TP documentation must be completed no later than the due date of filing the corporate income tax return.

A Dutch taxpayer that does not meet this requirement will face increased penalties and reversal of the burden of proof.

The time that is required to produce the local and master file should not be underestimated.


For more information or assistance with assessing your company’s readiness in meeting OECD Master File and Local File transfer pricing documentation requirements, as well as the preparation of benchmarking studies, please contact:

Jelle R. Bakker     

Josh Finfrock        



+31 88 321 08 07   |+31 6 51 74 45 67


This article was originally produced by Kreston International and distributed to its member firms.

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