The State Secretary for Finance has added to answers he recently gave to questions regarding draft legislation for the implementation of the first EU directive combating tax avoidance (ATAD1). This concerns questions regarding the use and possibilities for the adaptation of substance requirements in Dutch laws and regulations. Demands are being made in several areas on the presence, activities and extent of companies, for example when giving advance certainty and with anti-misuse provisions.
Just this month, the State Secretary announced his plans for the revision of ruling practice. In an explanatory statement to this, he touches on future substance requirements that are being made in order to qualify for advance certainty. In the respective Corporate and Dividend taxation laws, substance requirements have been included under anti-misuse provisions. Current Dutch substance requirements satisfy European law criterion for combating misuse. The possibility of strengthening substance requirements is limited by European law. This sets as a requirement that completely artificial arrangements are in question.
Based on a judgment by the European Court of Justice, a rebuttal scheme will be included for cases where substance requirements are not met but where there is no question of completely artificial arrangements. By including a rebuttal scheme, substance requirements can be increased. However, the State Secretary expects that this increasing of requirements will lead to more legal uncertainty. For this reason, he is particularly reluctant to increase substance requirements.
Do you have questions regarding the substance requirements or Withholding taxes in general? Please feel free tocontact us.