What are the draw-backs of not meeting Dutch substance requirements?
The draw-backs of not meeting the Dutch substance requirements are:
- An APA or ATR request could be denied;
- An APA or ATR already agreed upon might not be applicable;
- The Dutch tax authorities might spontaneously inform foreign tax authorities about the structure.
Irrespective whether or not the substance requirements are not met, a Dutch resident company needs to be managed and controlled in the Netherlands in order to be included in a fiscal unity for Dutch corporate income tax purposes. Please note that an APA or ATR is typically drafted in such a way that the tax residency is a fact on which the APA or ATR is based. In case the Dutch substance requirements are not met, then the application of the APA or ATR might be denied, based on a misrepresentation of the facts by the taxpayer.