Answers to questions on the ATAD1 legislation

Earlier this year, the Dutch government announced the adoption of the European directive combating tax avoidance (ATAD1) in Tax Plan 2019. As a result, questions concerning the use and possibilities for the adaptation of the Dutch substance requirements were raised. The State Secretary for Finance has now added to answers to these questions.

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. With the ATAD1, the European Union lays down demands in several areas on the presence, activities and extent of companies, for example when giving advance certainty and with anti-misuse provisions. Hence, in the current Corporate and Dividend tax laws, substance requirements are included under anti-misuse provisions,  satisfying European law criterion for combating misuse.  Nevertheless, the European law limits the possibility of strengthening these substance requirements, because this law only applies these substance requirements to avoid completely artificial arrangements.

Well, based on a judgement by the European Court of Justice, the Dutch directive will adopt a rebuttal scheme. This will be included for those cases where substance requirements are not met but where there is no question of completely artificial arrangements.  By use of such a rebuttal scheme, the Dutch government can thus increase the substance requirements.  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.

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