Doing Business in the Netherlands 2012 - American Chamber of ...

underlying (realized and unrealized) income will be taxable at the
level of the Dutch shareholders.
Note that the Dutch participation exemption does not apply to a
shareholding in a VBI. Furthermore, a VBI may not credit
withholding taxes incurred, as it is not subject to tax. For the same
reason, VBIs do not have access to the Double Tax Treaty network of
the Netherlands.
Conclusively, the VBI is an attractive vehicle for structuring
investments like interest-bearing investments, since inbound interest
flows are usually not subject to withholding tax. In such case, the
proceeds derived from investments are received without any Dutch tax
burden by the ultimate shareholder, as the income of the VBI is not
taxed in the Netherlands and neither is a dividend distribution from
the VBI to its shareholders.
18.16 Transfer Pricing Regime
The Dutch tax authorities adhere in general to the OECD Transfer
Pricing Guidelines and apply the arm’s length principle. The arm’s
length principle requires that all intra-group transactions should occur
at the price that would have been agreed upon between unrelated
parties. So, if the transfer price differs from what unrelated parties
would have agreed upon, the pricing would generally not be at arm’s
length and the tax authorities may adjust the pricing accordingly.
A rule that specifically addresses transfer pricing documentation
(Article 8b CITA 1969) was introduced in the Dutch Corporate
Income Tax Act in 2001, effective 1 January 2002. The rule obliges
taxpayers to maintain documentation for transactions with related
parties. Such documentation must demonstrate how the intercompany
price was established. Furthermore, the documentation must
demonstrate that the terms and conditions of the inter-company
agreements were established at arm’s length.
198 Baker & McKenzie