Worldwide transfer pricing reference guide 2014

Netherlands (continued)
Statute of limitations on transfer pricing assessments
The statute of limitations on transfer pricing assessments is the same as the statute of limitations on tax assessments (as covered by
the General Tax Act). The statute of limitations for making an assessment is three years from the end of the taxpayer’s fiscal year. If the
tax inspector has granted an extension for filing the tax return, the assessment period is extended to the end of the extension period.
Once a final assessment for a financial year is imposed, additional assessments relating to that financial year can still be issued up to five
years after the end of the financial year (respectively 12 years in case of foreign source income). Similarly this period is extended with
the extension of the filing period granted to file the Dutch corporate income tax return. An additional assessment can however only be
imposed if:
• The Dutch tax authority discovers a new fact that the Dutch tax authority reasonably should not have known at the moment the final
assessment was issued
• The taxpayer acted in bad faith
• An additional assessment is only possible up to two years after the tax assessment has been issued in case of a mistake. A mistake is
recognized if (i) no tax assessment has been issued at all and/or (ii) the tax assessment is too low, while the taxpayer reasonably should
have known that the final tax assessment was incorrect (if the difference amounts to at least 30% of the total taxes due the taxpayer is
deemed to have been aware of the mistake)
Return disclosures/related party disclosures
Dutch corporate income taxpayers are required to confirm in the corporate income tax return (by checking a separate box) whether they
have been involved in cross-border related party transactions involving tangible and intangible fixed assets during the fiscal year.
Transfer pricing-specific returns
Dutch corporate income taxpayers are not required to file a specific transfer pricing return in addition to the regular corporate income
tax return.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
The likelihood of being audited by the tax authority in the Netherlands is considered moderate. However, when one is being audited,
the likelihood of transfer pricing issues being scrutinized is high. Thus the controversy risk is high as well. In particular, there is a high
likelihood that the transfer pricing methodology will be assessed relative to the specific facts and circumstances.
Transfer pricing is a key issue in any tax audit, and many companies are subject to separate transfer pricing audits. A functional analysis
is incorporated into many of these audits and forms the basis of transfer pricing risk analysis of taxpayers.
The tax authority has, among others, shown interest in performing head office audits (which include intra-group services and other
activities performed by the head office) and in analyzing the economic substance of transactions, in terms of alignment of functions
and risks. Next to head office activities, intangibles transactions are often evaluated, as well as business reorganizations, centralized
purchasing companies, captive insurance companies and financial services transactions (including loans and guarantees). During these
transfer pricing audits the tax authority appears to have a particular interest in potential internal CUPs and the economic substance of a
transaction.
The tax authority has also focused, as a natural result of the risk analysis, on transactions with entities located in low effective tax rate
countries.
APA opportunity
Unilateral, bilateral and multilateral APAs with rollback features are available. The APA process works very efficiently in the Netherlands.
There are a number of specific features that enable an efficient and transparent process, including the option to hold pre-filing meetings,
the opportunity to develop a case management plan with the APA team to agree upon timing and key steps, and even specific support
regarding economic analysis that is available to small taxpayers.
There are specific (unilateral) APA options for Dutch financial services entities. Financial services entities consist of both financing
(mere receipt and payment of intercompany interest) and licensing (mere receipt and payment of intercompany royalties) companies.
Worldwide transfer pricing reference guide
209