CMS Expert Guide to Transfer Pricing Documentation in the Netherlands

A. Transfer pricing documentation requirements

The Dutch TP rules are laid down in article 8b of the Dutch Corporate Income Tax Act 1969 (“CITA”). According to article 8b CITA, prices agreed among associated enterprises must be at arm’s length, meaning that they must conduct business as if they were independent third parties. Pursuant to article 8b, paragraph 3 CITA, all taxpayers are obliged to maintain TP documentation in order to substantiate that such prices are at arm’s length. 

There are three different pillars of required TP documentation depending on annual revenue:

• <<EUR 50 million: Dutch-resident taxpayers with a consolidated annual revenue of less than EUR 50 million must satisfy the general TP documentation requirement (article 8b, paragraph 3 CITA), which consists of keeping record of how their TPs are determined (no specific form required)
• EUR 50-750 million: Dutch-resident taxpayers which are part of a multinational enterprise (“MNE”) group with a consolidated annual revenue of EUR 50-750 million must have available a Master File and a Local File (article 29g CITA) in their administration at the point when the taxpayer must file its tax return for the same tax year. If such Master File and Local File are available, the general TP documentation requirement of article 8b CITA is satisfied
•  >EUR 750 million: Dutch-resident taxpayers which are part of an MNE group with a consolidated annual revenue of more than EUR 750 million must file a Country-by-Country Report (“CbCR”) besides having a Master File and Local File available in their administration (article 29c-29d CITA, see section B).

All transactions with associated enterprises, both Dutch and foreign, must be documented. No threshold applies to this obligation.

Article 8b CITA applies if an entity participates, directly or indirectly, in the management, control or capital of another entity, or the same entity participates, directly or indirectly, in the management, control or capital of both the first and second entity.

For transactions between a PE and its head office, the Netherlands adheres to the OECD’s so-called “functionally separate entity approach”. Based on this approach, a PE’s taxable profit should be based on arm’s length TP as if the PE were a separate entity within the taxpayer’s group. As a result, transactions between a PE and its head office are in the scope of the documentation requirement.

The general documentation requirement under Dutch tax law is an open standard. Taxpayers can therefore opt to voluntarily apply the EU TPD. The currently lapsed Dutch Transfer Pricing Decree 2013 indicated that Dutch entities complied with the documentation requirement under Dutch tax law if they used the EU TPD. However, the 2018 and subsequently issued 2022 Transfer Pricing Decrees indicate that Dutch entities comply with the documentation requirement by preparing a Local File and Master File on the basis of the OECD standard. This replaced the concession on the EU TPD in the lapsed Dutch Transfer Pricing Decree 2013. However, Dutch resident taxpayers opting to apply the EU TPD standard should generally comply with the general documentation requirement of article 8b CITA. Please note that it is possible to obtain advance certainty from the Dutch tax authorities as to whether the general documentation requirement of article 8b CITA has been satisfied.

The Dutch legislator introduced an open standard with respect to the general documentation requirement of article 8b. This means that this documentation requirement is form-free. Pursuant to the explanatory memorandum the TP documentation should at least consist of a description of the five comparability factors mentioned in Chapter I of the OECD Guidelines, a substantiation of the TP method applied, and a substantiation of the conditions (including the price) to the transaction.

The Dutch legislation on Master File and Local File and Country-by-Country Reporting for companies with a consolidated annual revenue of more than EUR 50 million, and/or more than EUR 750 million, is in line with the OECD standards.

Non-resident taxpayers do not need to provide any specific information upon request. However, Dutch taxpayers are required to provide the tax authorities with any information related to the required TP documentation, even if this information concerns non-resident taxpayers or information which is located in another state.

Dutch tax law emphasises the open standard for the general documentation requirements of article 8b CITA. Benchmark studies are not mandatory under the domestic documentation requirement of article 8b CITA, but are generally advisable. In assessing the adequacy of any study, proportionality between administrative burden and providing information plays a large role. In line with this principle, it may prove useful to have a regional benchmark in some cases, but there is no guarantee of acceptance by the tax authorities.

The tax authorities align with the OECD TP Guidelines on low value-adding intragroup services. If substantiated with appropriate documentation, it is possible to use a flat 5% profit mark-up on costs for these services. This simplified approach is accompanied by a simplified and more limited benefit test from the perspective of the receiver of aforementioned services. For the qualification of low value-adding intragroup services, the criteria set out in paragraph 7.45-7.49 of the OECD TP Guidelines are adhered to.  

There are no clear rules in this respect, except that the tax authorities should be able to understand the documents. It is commonly accepted that TP documentation may be in Dutch or English. The content of the Master File and Local File is based on the OECD’s models and can be prepared in Dutch or English (article 29g CITA).

In principle, the taxpayer must have general TP documentation (as laid down in article 8b CITA) available from the moment that the transaction takes place. The Master File and Local File (as laid down in article 29g CITA) must be prepared and kept in the taxpayer’s records when the corporate income tax return is filed.

In practice, however, it is sufficient if the documentation is drafted and provided within a reasonable period after the tax authorities request it. Generally, a minimum extension period of 4 weeks is granted. For complex TP documentation, an extension of up to 3 months may be negotiated with the tax authorities.

In the Netherlands, failure to comply with the obligation to provide TP documentation is penalised under general tax laws. Cases of non-compliance can result in a fine of up to EUR 10,300 (2024) or imprisonment of up to 6 months. In case of intent, the fine amount is increased to a maximum of EUR 25,750 (2024) and imprisonment to a maximum of 4 years.

If the taxpayer fails to provide appropriate documentation or provides incomplete documentation, the burden of proof may be reversed to the taxpayer.

A penalty or shifting of burden of proof does not prevent the taxpayer requesting a MAP.

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B. Country By Country Reporting (“CBCR”)

As of 2016, the Netherlands has implemented CbCR legislation, laid down in articles 29b until 29f CITA. The legislation is based on the OECD’s proposed legislation.

The obligation applies for tax years starting on 1 January 2016. The deadline for filing the CbCR is 12 months after the end of the relevant tax year.

The obligation to file a CbCR rests with Dutch taxpayers that are the parent entity or designated reporting entity of an MNE group with a consolidated annual revenue of at least EUR 750 million. Dutch group companies that are not required to file CbCRs are obliged to notify the Dutch Tax Authorities which entity of their group will file the CbCR.

The content of the Dutch CbCR is fully in line with the OECD model, and the Netherlands uses the exact CbCR models as prepared by the OECD.

Non-compliance with CbCR legislation could lead to a penalty of maximum EUR 25,750 (2024). In case of intentional non-compliance or “serious misconduct” of the entity regarding its CbCR obligations, such penalty may potentially increase to a maximum of EUR 1,030,000 (2024).

Yes, most Dutch tax treaties include provisions for the exchange of information with other jurisdictions.

Furthermore, the Netherlands signed the Multilateral Competent Authority Agreement for the automatic exchange of Country-by-Country Reports on 27 January 2017.

EU Public CbCR

An additional obligation ­– EU Public CbC Reporting – entered into effect in the Netherlands for accounting periods beginning on or after 22 June 2024.

EU MNEs and non-EU MNEs with a consolidated annual revenue of at least EUR 750 million, doing business in the EU for 2 consecutive years, are required to publicly disclose, per country, information on the amount of income, profit/loss before tax, and taxes paid and accrued (among other information), per jurisdiction. Such publication must be made in the website of the ultimate parent entity or in the Netherlands Chamber of Commerce (Kamer van Koophandel).

C. As the case may be , other documentation/filing requirements in realtion to TP ?

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