Author: Courts of Netherlands

Netherlands vs “Tobacco B.V.”, October 2022, Rechtbank Noord-Holland, Case No ECLI:NL:RBNHO:2022:8936

Netherlands vs "Tobacco B.V.", October 2022, Rechtbank Noord-Holland, Case No ECLI:NL:RBNHO:2022:8936
“Tobacco B.V.” is a Dutch company belonging to an international tobacco group. Following an audit an assessment of additional taxable income of €196,001,385, €220,624,304 and €179,896,349 for FY 2008-2010 was issued to “Tobacco B.V.”, and a penalty for non-compliance for FY 2010 of €477,624 was imposed. The dispute focused on whether the fees charged by various group companies for supplies and services had been at arm’s length. To finance their activities, the group companies issued listed bonds under the tobacco group’s so-called EMTN Programme, guaranteed by the parent company in the UK. For this, the claimant paid an annual guarantee fee to the parent company of approximately €35,000,000. Judgement of the court – the guarantee fees are not expenses originating from the “Tobacco B.V.”‘s acceptance of liability for debts of an affiliated company; – the EMTN Programme is not a credit arrangement within the meaning ... Read more

Netherlands vs “Agri B.V.”, September 2022, Court of Appeal, Case No AWB-16_5664 (ECLI:NL:RBNHO:2022:9062)

Netherlands vs "Agri B.V.", September 2022, Court of Appeal, Case No AWB-16_5664 (ECLI:NL:RBNHO:2022:9062)
“Agri B.V.” is a Dutch subsidiary in an international group processing agricultural products. Following a restructuring in 2009 “Agri B.V.” had declared a profit of € 35 million, including € 2 million in exit profits. In an assessment issued by the tax authorities this amount had been adjusted to more than € 350 million. Judgement of the Court of Appeal The Court of appeal decided predominantly in favour of the tax authorities. An expert was appointed to determine the value of what had been transferred, and based on the valuation report produced by the expert the court set the taxable profit for 2009/2010 to €117 million. Excerpt “The Functional Analysis of [company 9] submitted, the Asset Sale and Purchase Agreements, the Manufacturing Services Agreements and the Consulting services and assistance in conducting business activities agreements show that there was a transfer of more than just ... Read more

Netherlands vs “Owner B.V.”, July 2022, District Court, Case No. ECLI:NL:RBNHO:2022:6584

Netherlands vs "Owner B.V.", July 2022, District Court, Case No. ECLI:NL:RBNHO:2022:6584
Owner B.V. was set up by a number of investors to acquire a Belgian entity with Dutch subsidiaries. After the acquisition the Dutch subsidiaries were merged into a fiscal unity with Owner B.V. Interest in an amount of EUR 1.7 million due on the debt related to the acquisition was considered by the court not deductible under section 10a of the Vpb Act. In addition, Owner B.V.’s profit had been reduced by EUR 6.0 million by interest on shareholder loans. The court deemed that 4.5 million of this amount was not deductible by virtue of fraus legis. The court further ruled that part of the costs charged to the Dutch company qualified as financing costs and could be deducted. Excerpts “5.8. The defendant has argued that under Section 8b of the Vpb Act, a full recharacterisation of the loans can and should take place, which ... Read more

Netherlands vs “Fertilizer BV”, April 2022, Court of Appeal, Case No. ECLI:NL:GHSHE:2022:1198

Netherlands vs "Fertilizer BV", April 2022, Court of Appeal, Case No. ECLI:NL:GHSHE:2022:1198
In 2016 Fertilizer BV had been issued a tax assessment for FY 2012 in which the tax authorities had imposed additional taxable income of €133,076,615. In November 2019 the district court ruled predominantly in favor of the tax authorities but reduced the adjustment to €78.294.312. An appel was filed by Fertilizer BV with the Court of Appeal. Judgement of the Court of Appeal Various issues related to the assessment was disputed before the Court. Dispute 1: Allocation of debt and equity capital to a permanent establishment in Libya in connection with the application of the object exemption. More specifically, the dispute is whether the creditworthiness of the head office was correctly taken as a starting point and a sufficient adjustment was made for the increased risk profile of the permanent establishment. The Court of Appeal answered this question in the affirmative, referring to the capital ... Read more

Netherlands – Crop Tax Advisers, January 2022, Court of Appeal, Case No. 200.192.332/01, ECLI:NL:GHARL:2022:343

Netherlands - Crop Tax Advisers, January 2022, Court of Appeal, Case No. 200.192.332/01, ECLI:NL:GHARL:2022:343
The question at issue was whether a Crop tax adviser had acted in accordance with the requirements of a reasonably competent and reasonably acting adviser when advising on the so-called royalty routing and its implementation. Judgement of the Court of Appeal “Crop is liable for the damages arising from the shortcoming. For the assessment of that damage, the case must be referred to the Statement of Damages, as the District Court has already decided. To answer the question of whether the likelihood of damage resulting from the shortcomings is plausible, a comparison must be made between the current situation and the situation in which business rates would have been applied. For the hypothetical situation, the rates to be recommended by the expert should be used. For the current situation, the Tax Authorities have agreed to adjusted pricing. The question whether and to what extent [the ... Read more

Netherlands vs Hunkemöller B.V., July 2021, Supreme Court, Case No ECLI:NL:2021:1152

Netherlands vs Hunkemöller B.V., July 2021, Supreme Court, Case No ECLI:NL:2021:1152
In 2011 a Dutch group “Hunkemöller BV” acquired “Target BV” for EUR 135 million. The acquisition was financed by four French affiliates “FCPRs” in the Dutch Group – EUR 60,345,000 in the form of convertible instruments (intercompany debt) and the remainder in the form of equity. The convertible instruments carried an interest rates of 13 percent. The four French FCPRs were considered transparent for French tax purposes, but non-transparent for Dutch tax purposes. Hence the interest payments were deducted from the taxable income reported by the Group in the Netherlands, but the interest income was not taxed in France – the structure thus resulted in a tax mismatch. The Dutch tax authorities argued that the interest payments should not be deductible as the setup of the financing structure constituted abuse of law; the financing structure was set up in this particular manner to get around ... Read more

Netherlands vs X B.V., July 2021, Supreme Court, Case No ECLI:NL:2021:1102

Netherlands vs X B.V., July 2021, Supreme Court, Case No ECLI:NL:2021:1102
X B.V., a private limited company established in the Netherlands, is part of a globally operating group (hereafter: the Group). In the years under review, the head office, which was also the top holding company, was located in the USA. Until 1 February 2008, the X B.V. was, together with BV 1 and BV 2, included in a fiscal unity for corporate income tax with the Interested Party as the parent company. As of 1 February 2008, a number of companies were added to the fiscal unity, including BV 3 and BV 4. X B.V. is considered transparent for tax purposes according to US standards. Its parent company is a company domiciled in the USA, as further described in 2.1.8 below. In 2006, BV 1 borrowed € 195,000,000 under a Euro Credit Facility (ECF), a head office guaranteed credit facility with a syndicate of sixteen ... Read more

Netherlands vs “Related Party B.V.”, July 2021, District Court, Case No ECLI:NL:RBGEL:2021:3382

Netherlands vs "Related Party B.V.", July 2021, District Court, Case No ECLI:NL:RBGEL:2021:3382
In 2013 “Related Party B.V” entered into an agreement with “X BV” for the provision of transportation- and support services for oil and gas. The Dutch tax authority suspected that the parties were affiliated within the meaning of Section 8b of the Corporate Income Tax Act 1969. Decision of Court The Court decided in favor of the tax authority. Based on the documents in the case, the tax authority rightly suspected that there was an affiliation within the meaning of Section 8b of the Corporate Income Tax Act. The tax authority was therefore entitled to reasonably issue information decisions for the Vpb for 2013 to 2016 inclusive. Nemo Tenetur Principle – self incrimination “Related Party B.V” argued that it’s right not to incriminate itself had been violated because the information decision(s) had been issued to examine the possibility of imposing a fine. In this regard, ... Read more

Netherlands vs Lender B.V., March 2021, Supreme Court, Case No ECLI:NL:GHAMS:2021:724

Netherlands vs Lender B.V., March 2021, Supreme Court, Case No ECLI:NL:GHAMS:2021:724
A Dutch company, Lender B.V., had acquired companies through a private equity structure. The Dutch company that had been set up for the purpose of the acquisition was financed by subordinated loans payable to related parties established on the island of Guernsey. In the tax return for the Dutch company interest in the amount of € 13,157,632 was deducted in the taxable income based on an interest rate of 11,5 – 14 percent. The tax authorities denied the deduction, as the financing arrangement was considered abusive. Decision of the Supreme Court The Court decided in favor of the tax authorities. The interest on the loans was determined to 2.5% (instead of the agreed 11.5 – 14%). This interest was not deductible, because granting of the loans was considered as abusive. Furthermore, an Arrangement Fee of € 8.4 mio. could not be charged at once, but ... Read more

Netherlands vs “Share Owner/Lender”, February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

Netherlands vs "Share Owner/Lender", February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884
The interested party bought AEX-listed shares, sold three-month futures based on those shares through its shareholder/broker [D], and lent the shares to [D] (stock lending). It received cash collateral ($ deposits as collateral) and a stock lending fee for its lending. According to the interested party, the shares always briefly reverted to its ownership around their dividend dates through registration in the interested party’s securities account with the French custodian bank on the basis of legal transactions between its shareholder [D] and it, represented by [D]. In dispute is the question whether the interested party is entitled to a set-off of € 39,249,246 in Dutch dividend tax withheld from the dividends on the shares lent by her. Did she receive the dividends (was she the beneficial owner?) and if so, was she also the ultimate beneficiary of the dividend? Also in dispute is whether the ... Read more

Netherlands vs X B.V., December 2020, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/02096 ECLI:NL:PHR:2020:1198

Netherlands vs X B.V., December 2020, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/02096 ECLI:NL:PHR:2020:1198
This case concerns a private equity takeover structure with apparently an intended international mismatch, i.e. a deduction/no inclusion of the remuneration on the provision of funds. The case was (primarily) decided by the Court of Appeal on the basis of non-business loan case law. The facts are as follows: A private equity fund [A] raised LP equity capital from (institutional) investors in its subfund [B] and then channelled it into two (sub)funds configured in the Cayman Islands, Fund [C] and [D] Fund. Participating in those two Funds were LPs in which the limited partners were the external equity investors and the general partners were Jersey-based [A] entities and/or executives. The equity raised in [A] was used for leveraged, debt-financed acquisitions of European targets to be sold at a capital gain after five to seven years, after optimising their EBITDA. One of these European targets was ... Read more

Netherlands vs X B.V., July 2020, Supreme Court (Preliminary ruling by the Advocate General), Case No ECLI:NL:PHR:2020:672

Netherlands vs X B.V., July 2020, Supreme Court (Preliminary ruling by the Advocate General), Case No ECLI:NL:PHR:2020:672
X bv is part of the worldwide X group, a financial service provider listed on the US stock exchange. At issue is deductibility of interest payments by X bv on a € 482 million loan granted by the parent company, US Inc. In 2010 the original loan between X bv and US Inc. was converted into two loans of € 191 million and € 291 million granted by a Luxembourg finance company in the X group, to two jointly taxed subsidiaries of X bv. According to the Dutch Tax Authorities, the interest payments on these loans falls under the provisions in Dutch art. 10a of the VPB Act 1969 whereby interest deductions are restricted. The Court of appeal disagreed and ruled in favor of X bv. This decision was appealed to the Supreme Court by the tax authorities. In a preliminary ruling, the Advocate General ... Read more

Netherlands vs Zinc Smelter B.V., March 2020, Court of Appeal, Case No ECLI:NL:GHSHE:2020:968

Netherlands vs Zinc Smelter B.V., March 2020, Court of Appeal, Case No ECLI:NL:GHSHE:2020:968
A Dutch company, Zinc Smelter B.V., transferred part of it’s business to a Swiss group company in 2010. In dispute was whether the payment for the transferred activities had been set at arm’s length, and whether the cost-plus remuneration applied to the Dutch company after the business restructuring constituted an arm’s length remuneration for the remaining activities in the company. The case had previously been presented before the lower court where a decision had been issued in October 2017. After hearings in the Court of Appeal, Zinc Smelter B.V. and the Dutch tax authorities reached a settlement which was laid down in the decision. According to the agreement the profit split method was the correct method for determining the arm’s length remuneration of the Dutch company after the restructuring. Click here for English translation ECLI_NL_GHSHE_2020_968 ... Read more

Netherlands vs Hunkemöller B.V., January 2020, AG opinion – before the Supreme Court, Case No ECLI:NL:PHR:2020:102

Netherlands vs Hunkemöller B.V., January 2020, AG opinion - before the Supreme Court, Case No ECLI:NL:PHR:2020:102
To acquire companies and resell them with capital gains a French Investment Fund distributed the capital of its investors (€ 5.4 billion in equity) between a French Fund Commun de Placement à Risques (FCPRs) and British Ltds managed by the French Investment Fund. For the purpose of acquiring the [X] group (the target), the French Investment Fund set up three legal entities in the Netherlands, [Y] UA, [B] BV, and [C] BV (the acquisition holding company). These three joint taxed entities are shown as Fiscal unit [A] below. The capital to be used for the acquisition of [X] group was divided into four FCPRs that held 30%, 30%, 30% and 10% in [Y] respectively. To get the full amount needed for the acquisition, [Y] members provided from their equity to [Y]: (i) member capital (€ 74.69 million by the FCPRs, € 1.96 million by the ... Read more

Netherlands vs “Fertilizer BV”, November 2019, District Court, Case No. ECLI:NL:RBZWB:2019:4920

Netherlands vs "Fertilizer BV", November 2019, District Court, Case No. ECLI:NL:RBZWB:2019:4920
In 2016 Fertilizer BV had been issued a tax assessment for FY 2012 in which the tax authorities had imposed additional taxable income of €162,506,660. Fertilizer BV is the parent company of a fiscal unity for corporation tax (hereinafter: FU). It is a limited partner in a limited partnership under Dutch law, which operates a factory in [Country 1]. The interested party borrowed the money for the capital contribution to the limited partnership from a wholly-owned subsidiary. The share in profits from the limited partnership was expressed as profit from a permanent establishment. In dispute was the amount of interest attributable to the permanent establishment. The court followed the inspector in allocating – in connection with the [circumstances] in [Country 1] – 75% equity and 25% loan capital to the PE. Furthermore, the FU had deposits and loans in USD. These positions were partly hedged ... Read more

Netherlands vs. Swiss Corp, November 2019, Rechtbank Noord-Nederland, Case No. 2019:1492

Netherlands vs. Swiss Corp, November 2019, Rechtbank Noord-Nederland, Case No. 2019:1492
For the purpose of determining whether a Swiss Corporation had effectively been managed from the Netherlands or had a permanent establishment in the Netherlands, the Dutch tax authorities send a request for information. The Swiss Corp was not willing to answer the request and argued that the request was disproportionate and that the concepts of “documents concerning decision-making with regard to important decisions” and “e-mail files” was and did not fit into the powers that an inspector has under Article 47 of the AWR. Judgement of the Court The court ruled in favor of the tax authorities. The court did not find the tax authorities’ request for information disproportionate. Article 47 of the Awr requires the provision of factual information and information that may be relevant to taxation with respect to the taxpayer (cf. Supreme Court October 20, 2017, ECLI: NL: HR: 2017: 2654). In ... Read more

Aruba vs PriceSmart Inc., September 2019, Council for Tax Affairs of Aruba, Case No 2010/45712

Aruba vs PriceSmart Inc., September 2019, Council for Tax Affairs of Aruba, Case No 2010/45712
PriceSmart Inc (PSMT) operates a retail chain including approximately 25 department stores in the Caribbean and Central America. PSMT’s local branch had recognised losses in their profit tax returns for the years 2001 to 2006. In 2009, the tax authorities audited the tax returns for the years 2002 to 2006. At issue was the definition and interpretation of the various functions of the interested party and the risks incurred. In particular, the dispute concerned transfer pricing typologies, and whether the local branch could be characterised as a ‘Limited Risk Distributor’ or as a ‘Buy-Sell Distributor’ with a ‘proprietary’ risk in respect of, inter alia, accounts receivable, stock and currency. The tax authorities characterised the local branch as a ‘Limited Distributor’ as it was not the local branch but PSMT Inc. that determined the marketing strategy, mix of products. The branch hasd virtually no decision-making influence ... Read more

Netherlands vs Crop Tax Advisors, June 2019, Court of the Northern Netherlands, Case No 200.192.332/01

Netherlands vs Crop Tax Advisors, June 2019, Court of the Northern Netherlands, Case No 200.192.332/01
The question at issue was whether a tax adviser at Crop BV had acted in accordance with the requirements of a reasonably competent and reasonably acting adviser when advising on the so-called royalty routing and its implementation and when giving advice on trading. Click here for translation NL royalty routing1 ... Read more

Netherlands vs Tax advisor, June 2019, Court of Northern Netherlands, Case No. 200.193.965/01

Netherlands vs Tax advisor, June 2019, Court of Northern Netherlands, Case No. 200.193.965/01
The question at issue was whether a tax adviser had acted in accordance with the requirements of a reasonably competent and reasonably acting adviser when advising on the so-called royalty routing and its implementation and when giving advice on trading. Click here for other translation NL Royalty routing2 ... Read more

Netherlands vs Lender BV, June 2019, Tax Court, Case No 17/871

Netherlands vs Lender BV, June 2019, Tax Court, Case No 17/871
A Dutch company, Lender BV, provided loans to an affiliated Russian company on which interest was paid. The Dispute was (1) whether the full amount of interest should be included in the taxable income in the Netherlands, or if part of the “interest payment” was subject to the participation exemption or (2) whether the Netherlands was required to provide relief from double taxation for the Russian dividend tax and, if so, to what amount. The Tax court found it to be a loan and the payments therefor qualified as interest and not dividend. The participation exemption does not apply to interest. In addition, the court ruled that the Russian thin-capitalization rules did not have an effect on the Netherlands through Article 9 of the Convention for the avoidance of double taxation between the Netherlands and Russia. Application of the participation exemption was not an issue. In the opinion ... Read more

Netherlands vs X B.V., November 2018, Supreme Court, Case No 17/03918

Netherlands vs X B.V., November 2018, Supreme Court, Case No 17/03918
Company X B.V. held all the shares in the Irish company A. The Tax Agency in the Netherlands claimed that the Irish company A qualified as a “low-taxed investment participation”. The court agreed, as company A was not subject to a taxation of 10 per cent or more in Ireland. The Tax Agency also claimed that X B.V.’s profit should include a hidden dividend due to company A’s providing an interest-free loan to another associated Irish company E. The court agreed. Irish company E had benefited from the interest-free loan and this benefit should be regarded as a dividend distribution. It was then claimed by company X B.V, that the tax treaty between the Netherlands and Ireland did not permit including hidden dividends in X’s profit. The Supreme Court disagreed and found that the hidden dividend falls within the scope of the term “dividends” in ... Read more

Netherlands vs NL PE, October 2018, Amsterdam Court of Appeal, case no. 17/00407 to 17/00410

Netherlands vs NL PE, October 2018, Amsterdam Court of Appeal, case no. 17/00407 to 17/00410
The issue in this case was attribution of profits to a permanent establishment in the Netherlands. Click here for translation ECLI_NL_GHAMS_2018_2438, Gerechtshof Amsterdam, 17_00407 tm 17_00410N ... Read more

Netherlands vs B.V, July 2018, Hoge Raad Case No 17/04930 17/05713 17/05714

Netherlands vs B.V, July 2018, Hoge Raad Case No 17/04930 17/05713 17/05714
It follows from various Supreme Court judgments in the Netherlands that a loan is commercially irrational if no interest can be determined under which an independent third party would have been willing to grant the same loan. The consequence of a loan beeing deemed commercially irrational is that a loss is not deductible. This case addresses the implications of the Umbrella Judgement, in particular the question of how that judgment relates to case laws on unsecured loans and guarantees. The Advocate General concludes that the Umbrella Judgment is not applicable in this case and that the tax authorities has failed to demonstrate that an independent third party would not have been willing to enter a similar loan agreement. Click here for translation Nederland July 2018 ECLI NL PHR 2018 737 ... Read more

Netherland vs. A BV, October 2017, Lower Court, case no 2017: 5965

Netherland vs. A BV, October 2017, Lower Court, case no 2017: 5965
A Dutch parent company was providing support services to its foreign subsidiary on a cost-plus basis and received a compensation fee following a business restructuring where headquarter and strategic functions was transferred from the Dutch parent company to Switzerland. The Dutch tax authorities took the view that the compensation paid was insufficient, and that the Dutch parent company was still performing strategic functions for the group. The Court ruled that the taxpayer had fulfilled its legal obligations by preparing thorough transfer pricing documentation and that the burden of proof was on the Dutch tax authorities. The Court ruled that the tax authorities did not provide sufficient arguments to support the adjustment. The original assessment of € 188.342.906 was reduced to a calculated taxable profit of € 42,641,089 and a taxable amount of € 32,067,270. Click here for translation Netherland vs X BV 19 november 2017 ... Read more

Netherlands vs “Zinc-Smelter Restructuring BV”, September 2017, Rechtbank ZWB, No BRE 15/5683

Netherlands vs "Zinc-Smelter Restructuring BV", September 2017, Rechtbank ZWB, No BRE 15/5683
A Dutch company was engaged in smelting of zinc. The business was then restructured, for which the company received a small compensation. Dutch tax authorities disagreed with both the amount of compensation payment and the arm’s-length remuneration of the post restructuring manufacturing activities. Until 2003 the Dutch Company was a fully fledged business. The company owned the assets and controlled the risks relating to the activities. In the years after 2003, the company was involved in several business restructurings: Activities other than the actual production activities were gradually transferred to other group companies, among others the global marketing and services team (GMS), took over purchasing, sales and deployment of personnel. After becoming part of another group in 2007, the company entered a consultancy agreement with another group company under witch strategic and business development, marketing, sales, finance, legal support, IT, staffing and environmental services was now provided on a cost plus 7.5% basis. Under ‘Project X’, a Belgian company was established in ... Read more

Netherlands vs Corp, October 2016, Supreme Court 16/01370

Netherlands vs Corp, October 2016, Supreme Court 16/01370
Company A had acquired the business (assets and liabilities) of another company, through an Acquisition B.V. Company A provided a loan of EUR 300,000 to Acquisition B.V. in 2008. The Acquisition B.V. failed to perform well and went bankrupt in 2011. Company A claimed a write-down loss on the loan in its corporate income tax return. The Tax Administration stated that this was an extreme default risk loan and did not accept the loss. According to Dutch case law the main characteristic of an EDR loan is that an arm’s length interest rate cannot be found – the shareholder grants the loan under such circumstances that it is clear from the outset that it cannot be repaid and the shareholder does not have business interest, other than in its capacity as shareholder, to grant the loan. The Arnhem-Leeuwarden Court of Appeal disagreed with the Tax ... Read more

Netherlands vs X BV, June 2016, Supreme Court, Case No 2016:1031 (14/05100)

Netherlands vs X BV, June 2016, Supreme Court, Case No 2016:1031 (14/05100)
In 1996, X BV acquired the right to commercially exploit an intangible asset (Z) for a period of 15 years for $ 63.5 million. X BV then entered into a franchise agreements with group companies for the use of Z, including a Spanish PE of Y BV. According to the franchise agreement Y BV paid X BV a fee. According to X, in the calculation of the loss carry forward in Spain the franchise fee should not be fully attributed to the PE in Spain due to existing rules on internal roaylties. X states that the loss carry forward amounts to € 13.1 million. The tax authorities increases the loss carry forward with the fee paid to X, for the use of Z by the Spanish PE. According to the tax authorities, the loss carry forward is € 16.1 million. The District Court finds that ... Read more

Nederlands vs. Corp, January 2014, Lower Court, Case nr. AWB11/3717, 11/3718, 11/3719, 11/3720, 11/3721

Nederlands vs. Corp, January 2014, Lower Court, Case nr. AWB11/3717, 11/3718, 11/3719, 11/3720, 11/3721
The case involved a Dutch mutual insurance company, DutchCo, which paid surpluses from the insurance activity back to the participating members in the form of premium restitution. Prior to 2002, DutchCo reinsured the majority of its risks with external reinsurers via an external reinsurance broker. DutchCo kept a small part of the risks for its own account. In 2001, DutchCo established a subsidiary in Switzerland, Captive, to act as a captive reinsurance provider. DutchCo stated that the business rationale to establish Captive goes back to “9/11.” The resulting worldwide turmoil significantly impacted the reinsurance market. In an extremely nervous market, premiums increased and conditions were sharpened. From 2002 onward, all the reinsurance contracts of DutchCo were concluded with Captive (in exchange for payment of premiums), whereby Captive reinsured a vast majority of these risks with external reinsurers and kept a limited part of the risk ... Read more

Netherlands vs “X B.V.”, March 2013, Supreme Court, Case No 11/02248, ECLI:NL:HR:2013:BW6552

Netherlands vs "X B.V.", March 2013, Supreme Court, Case No 11/02248, ECLI:NL:HR:2013:BW6552
The application of the WEV (waarde in het economische verkeer) rule is particularly relevant if the non-corporate loan is interest-free or the agreed interest is owed. The interest to be taken into account for tax purposes is then determined on the market value of each interest period at the time it falls due. The assessment of the business nature of the money supply can take place both at the time of supply and during the term. This test must be carried out on both sides, from the perspective of the lending and borrowing company. Referring to what has been said above with regard to the perspective of the entities involved, a situation of an affiliated lender granting a loan to the borrowing group entity that subsequently is insufficiently creditworthy may also constitute a ‘non-business loan’ in the approach of the aforementioned judgment. In my opinion, ... Read more

Netherlands vs. Corp, March 2013, Supreme Court, Case no. 11/01985

Netherlands vs. Corp, March 2013, Supreme Court, Case no. 11/01985
X BV  jointly participated in a third party credit arrangement with other group companies. X BV was jointly and severally liable for all the receivables that the creditor had on the other group companies under the credit arrangement, and the recourse (of X BV against the other group companies) that arose from such joint and several liability could not be claimed until the full amount outstanding under the credit arrangement had been repaid. The Supreme Court found that it could be assumed that a third party would not be willing to provide a guarantee only if, at the moment of granting the guarantee, no guarantee fee could be determined. The Supreme Court found that the cross guarantee was an arrangement that originated from shareholder interests. Hence a credit loss resulting from a cross-guarantee agreement was not deductible for tax purposes. Click here for translation Netherland-vs-Corp-March-2013-Supreme-Court-Case-no-11-01985 ... Read more

Nederlands vs “Paper Trading B.V.”, October 2011, Supreme Court, Case No 11/00762, ECLI:NL:HR:2011:BT8777

Nederlands vs "Paper Trading B.V.", October 2011, Supreme Court, Case No 11/00762, ECLI:NL:HR:2011:BT8777
“Paper Trading B.V.” was active in the business of buying and selling paper. The paper was purchased (mostly) in Finland, and sold in the Netherlands, Belgium, France, and Germany. The purchasing and selling activities were carried out by the director of Paper Trading B.V. “Mr. O” who was also the owner of all shares in the company. In 1994, Mr. O set up a company in Switzerland “Paper Trader A.G”. The appointed director of “Paper Trader A.G” was a certified tax advisor, accountant, and trustee, who also acted as director of various other companies registered at the same address. The Swiss director took care of administration, correspondence, invoicing and corporate tax compliance. A couple of years later, part of the purchasing and selling of the paper was now carried out through “Paper Trader A.G”. However, Mr. O proved to be highly involved in activities on ... Read more

Netherlands vs Corp, 2011, Dutch Supreme Court, Case nr. 08/05323 (10/05161, 10/04588)

Netherlands vs Corp, 2011, Dutch Supreme Court, Case nr. 08/05323 (10/05161, 10/04588)
In this case, the Dutch Supreme Court further outlined the Dutch perspective on the distinction between debt and equity in its already infamous judgments on the so-called extreme default risk loan (EDR loan) L sold a securities portfolio to B for EUR 5.3 million against B’s acknowledgement of debt to L for the same amount. The debt was then converted into a 10 year loan with  an interest rate of 5% and a pledge on the portfolio. Both L and B were then moved to the Netherlands Antilles. Later on L deducted a EUR 1.2 mill. loss on the loan to B due to a decrease in value of the securities portfolio. The Dutch Tax Authorities disallowed the deduction based on the argument, that the loan was not a business motivated loan. The Dutch Supreme Court ruled that in principle civil law arrangement is decisive in regard to ... Read more

Nederlands vs Corp, July 2011, District Court of Hague, Case No AWB 08/9105, LJN BR4966

Nederlands vs Corp, July 2011, District Court of Hague, Case No AWB 08/9105, LJN BR4966
X is the holding company of the so-called A-group, which is active in the recreation business. The activities in X was taking out cancellation insurance. Within the group an Irish re-insurance company was established. Several contracts were concluded between X and the Irish company with regard to the insurance activities. The court considered that the tax administration had proved that X transferred profits to the Irish company. The internal reinsurer generally does not perform the underwriting function, does not diversify risk itself and does not have the required expertise and experience in relation to the insurance activity and investment of the premiums received. Therefore, transactions between the internal reinsurer and the group entity pursuing the main business of the group will not qualify as insurance transactions. The reinsurance entity performs only a limited administrative function that justifies only limited remuneration. Click here for English translation Click here for other ... Read more

Netherlands vs Shoe Corp, June 2007, District Court, Case nr. 05/1352, VSN June 2, 2007

Netherlands vs Shoe Corp, June 2007, District Court, Case nr. 05/1352, VSN June 2, 2007
This case is about a IP sale-and-license-back arrangement. The taxpayer acquired the shares in BV Z (holding). BV Z owns the shares in BV A and BV B (the three BVs form a fiscal unity under the CITA). BV A produces and sells shoes. In 1993, under a self-proclaimed protection clause, BV A sells the trademark of the shoes to BV C, which is also part of the fiscal unity. The protection clause was supposedly intended to protect the trademark in case of default of BV A. Taxpayer had created BV C prior to the sale of the trademark. In 1994, the taxpayer entered into a licensing agreement with BV C: the taxpayer pays NLG 2 to BV C per pair of shoes sold. Next, BV C is then moved to the Netherlands Antilles, which results in the end of the fiscal unity as of January ... Read more

Netherland vs. X BV, March 2007, District Court of Arnhem, Case No ECLI:NL:RBARN:2007:BA0339

Netherland vs. X BV, March 2007, District Court of Arnhem, Case No ECLI:NL:RBARN:2007:BA0339
X BV in the Netherlands was a wholesaler in garden related (gift) articles. Customers are located in the Netherlands and abroad (especially in Western Europe, the United States and Canada). Procurement of the products is mainly done in China. Delivery of the products is made directly by the producer to [X] BV or to its other clients. As compensation for procurement activities performed by the [X Limited] in Hong Kong, X group BV pays a 10% surcharge on the purchase price paid by [X Limited] to its Chinese suppliers. This surcharge is passed on in the cost price of the products. The tax administration held that the compensation [X Limited] receives for its procurement activities is (much) too high. The District Court disagreed and decided in favor of X Group BV. Click here for other translation Netherland vs BV 2007 ... Read more

Netherlands vs “Holding B.V.”, March 2007, District Court, Case No AWB 06/288, V-N 2007/35.6

Netherlands vs "Holding B.V.", March 2007, District Court, Case No AWB 06/288, V-N 2007/35.6
“Holding B.V.” is a holding company. The actual activity of the [X] group in the Netherlands – a wholesale trade in garden-related (gift) items – takes place in [X] B.V. The latter is included in a fiscal consolidation for corporate tax purposes with “Holding B.V.”. Customers of [X] B.V. are located in both the Netherlands and abroad (particularly in Western Europe, the United States and Canada). The products are purchased in China in particular and supplied direct by the producer to [X] B.V. or to its other customers. The procurement company – X Limited has an office and a showroom in Hong Kong, and employs a staff of five. The core activities of X Limited consist of quality control, logistics, product development, purchasing and sales. As remuneration for its activities, [X] B.V. pays a mark-up of 10% on the purchase price paid by X Limited ... Read more

Netherlands vs “X B.V.”, August 1998, Supreme Court, Case No 32997, ECLI:NL:HR:1998:AA2288

Netherlands vs "X B.V.", August 1998, Supreme Court, Case No 32997, ECLI:NL:HR:1998:AA2288
In a situation where a new intangible asset has been developed and is transferred to an affiliate at a time when its success is not yet sufficiently apparent, for example, because the intangible asset has not yet generated revenues and there are significant uncertainties in estimating future revenues, the valuation at the time of the transaction is highly uncertain and the inclusion of a price adjustment clause makes sense. Click here for English translation Click here for other translation ECLI_NL_HR_1998_AA2288 ... Read more

Netherlands vs “Metal Packaging Procurement B.V.”, April 2004, Hoge Raad, Case No 39542, ECLI:NL:HR:2004:AO9474

Netherlands vs "Metal Packaging Procurement B.V.", April 2004, Hoge Raad, Case No 39542, ECLI:NL:HR:2004:AO9474
This case concerns allocation of profits resulting from centralizing procurement functions within a group. The tax authorities took the position that the profit claimed by a centralized purchasing office was not aligned with the functions performed and the risks assumed by the office. According to the tax authorities profits derived from the realized discounts should be distributed to the members of the group (including a Dutch member) in proportion to their contribution of purchasing volume. Judgement of the Court The Supreme Court ruled in favor of the tax authorities. Profits in excess of the costs of the centralized purchase office with a markup of 5%, should at arm’s length be distributed to the members of the group in proportion to their contribution of purchasing volume. Excerpts “5.14. Notwithstanding the fact that [A-2 NV]’s profit was not so much caused by its own efforts but by ... Read more

The Netherlands vs X BV, February 2004, Appellate Court of Amsterdam V-N 2004/39.9.

The Netherlands vs X BV, February 2004, Appellate Court of Amsterdam V-N 2004/39.9.
X BV, is member of the English XX-group. One of X’s parents is XX Ltd., based in the United Kingdom. In 1992, X BV acquired licensing rights relating to the trade name J from J Ltd. Their value was determined to be GBP 19.2 million. According to the agreement, X BV paid GBP 19 million for the ten-year economic ownership of the licensing rights. J Ltd. sold the legal ownership to W BV for GBP 200,000 in which X BV owned all shares. In 1996, X BV sells the ten-year economic ownership to W BV for GBP 2 million. To support the GBP 19 million price for the economic ownership, a valuation report is drawn up in 1992. The valuation is based on “projected royalty streams” which showed increasing royalty streams over the ten-year period 1992-2002. The tax authorities disagrees with the price of GBP ... Read more

Netherlands vs “Dutch Low Risk Treasury B.V.”, August 2003, District Court, Case No 01/04083, ECLI:NL:GHAMS:2003:AJ6865

Netherlands vs "Dutch Low Risk Treasury B.V.", August 2003, District Court, Case No 01/04083, ECLI:NL:GHAMS:2003:AJ6865
This case concerns a Dutch treasury company with a low risk intra-group borrowing and on-lending activity. The interested party was incorporated on 5 August 1995 by a legal person named V Limited, under Canadian law. Its subscribed and paid-up capital amounted to NLG 40,000 in the years under review. The claimant is part of the V group. Its actual activities are described in its “Declaration of data on business start-ups” submitted to the tax authorities as “intra-group financing”. It maintained a bank account with the Bank of Montreal. In the financial years in question, the interested party lent substantial amounts of pounds sterling to its sister company Y Plc, incorporated under the laws of the United Kingdom, in the form of promissory notes and a revolving credit facility with effect from 31 January and 1 February 1996 respectively. The stakeholder obtained the necessary pounds by ... Read more

Netherlands vs “Car B.V.”, 28 June 2002, Supreme Court, Case No 36446, ECLI:NL:HR:2002:AE4718

Netherlands vs "Car B.V.", 28 June 2002, Supreme Court, Case No 36446, ECLI:NL:HR:2002:AE4718
In this case a Dutch subsidiary of a Japanese car group incurred losses related to import and sales of a specific car model. However in total the car importer remained profitable. The tax authorities claimed that the purchase price of the specific car model had been too high, and on that basis an assessment of additional income was issued. Judgement of the Supreme Court The court set aside the assessment and decided in favour of the car importer. According to the court the tax authorities did not make it sufficiently plausible that the price for the car model had not at arm’s length – taking into consideration the overall functions and profitability of the car importer. Excerpt “The following must be stated first. The at arm’s length principle, as included in Article 10(b) of the Treaty with Japan (Treaty Series 1970, 67, as amended by ... Read more