The Netherlands has a long-standing tradition of avoiding tax disputes through an open dialogue with the tax authorities. In line with the history and culture of the country (which is known as the 'polder model'), generally the Dutch tax authorities favour the resolution (or rather, prevention) of tax disputes by cherishing a climate where discussing tax positions is perfectly acceptable. In practice, most taxpayers tend to agree with that approach, if only because it avoids the inherent uncertainty of litigation and the considerable amount of time (and costs) associated with having to go through that process. This implies that the vast majority of (potential) tax disputes is resolved through dialogue and never ends up in court.

In light of the fact that the Dutch tax authorities are known for their cooperative attitude, not surprisingly the Netherlands has always been a frontrunner when it comes to exploring opportunities to reduce uncertainty in the area of taxation up front. As such, the Netherlands has a long-standing practice of obtaining advance certainty from the tax authorities through rulings.

At present, tax rulings normally take the form of a settlement agreement as defined in the Dutch Civil Code. This entails a written compromise on the interpretation of certain legal provisions as applicable to the taxpayer within the context of a proposed arrangement or series of arrangements. Settlement agreements are normally concluded on a case-by-case basis.

Also, with respect to tax matters that are not covered by the Dutch ruling practice, taxpayers may seek to conclude a settlement agreement with the tax inspector, namely either to avoid a potential debate or to terminate a dispute that has already occurred.

Notwithstanding the above, in the Netherlands tax litigation is certainly not an uncommon phenomenon and is generally accepted as a means of resolving disputes. One could say that because the country has a tradition of discussing tax matters openly, it is also accepted that parties may eventually agree to disagree. Obviously, litigation may be the only possibility to resolve a tax dispute where the facts are already fixed and the relevant tax period lies in the past.

Where the tax authorities have imposed a penalty for (allegedly) filing an incorrect tax return, litigation may become inevitable. This can be the event, for instance, the tax authorities are combating structures perceived as aggressive tax planning. Such cases tend to evolve around the question of whether a certain legal arrangement has any genuine economic substance or was created solely with a view to achieve certain tax benefits. In those cases, the Dutch tax authorities tend to evoke the abuse of law (fraus legis) doctrine to ignore these arrangements and, thus, deny the tax benefit that would result from a literal interpretation of the relevant legal provisions.

This is a particular area where the authorities tend to have less appetite for resolving a dispute cordially. At the same time, while taxpayers (and their advisers) may be willing to compromise on the desired tax benefit, they are often not prepared to accept a penalty (for various reasons). Litigation may then be the only possibility to cancel such penalty.

As regards tax disputes with an international dimension, the Netherlands is a strong advocate of resolving these in dialogue with the competent authority in the other state, namely through a mutual agreement procedure. Where the domestic taxpayers' interests at stake are significant, the Dutch tax authorities are generally willing to invest considerable time and effort of government officials in these procedures. Nonetheless, if necessary, such disputes may need to be resolved through binding arbitration, another dispute resolution favoured by the Dutch tax authorities.


In the Netherlands, the General Administrative Law Act provides for a wide-ranging framework governing the relations between citizens and their administration. The relevant legislation contains the principles any Dutch governmental body must adhere to in the process of making its decisions. Moreover, it contains the rules governing the consequences of these decisions, particularly the right of individual citizens to challenge these. Although most of these rules apply in matters of taxation as well, the General Tax Act provides for specific rules regarding matters of taxation, such as filing tax returns and the establishment of (additional) tax assessments, as well as procedural rules regarding administrative appeal and litigation in tax matters. While some of these rules merely add to the general framework, others deviate from it.

i Mandatory objection phase

Within the applicable legal system, a tax dispute typically commences with a taxpayer filing a notice of objection against an assessment or a formal decision issued by the tax inspector. This administrative appeal procedure with the tax administration must be completed prior to lodging an appeal to the tax courts, meaning that the initial appeal to court (i.e., to the lower court, in the first instance) is always launched by the taxpayer, namely against a (negative) decision by the tax inspector on such notice of objection.

The purpose of this mandatory objection phase is twofold. On the one hand, the procedure forces the tax administration to review decisions taken by an individual tax inspector, which should eliminate apparent mistakes and ensure a uniform and consistent approach to certain matters within the administration. On the other hand, administrative appeal is supposed to have a sort of filter function: because disputes do not immediately go to court, they may still be resolved between the parties at the preceding stage. Even though in some cases parties clearly have a different view on the application of the law (meaning that the administrative appeal procedure is essentially a repetition of moves – eventually the magistrates will need to decide on the matter), generally the obligation for the administration to reconsider its earlier decision reduces the number of cases brought before the Dutch tax courts.

ii Matters subject to objection

In relation to tax matters, administrative appeal is possible against tax assessments imposed on the taxpayer, as well as any formal decision taken by the tax inspector. In this regard, the specific procedural rules for tax litigation (as laid down in the General Tax Act) deviate from common Dutch administrative law (as laid down in the General Administrative Law Act). While the latter provides for an open system of legal remedies in that any decision taken by the administration is in principle subject to objection and appeal, for tax purposes the system of legal remedies is more or less closed.

In principle, a taxpayer can only come up against those decisions that are explicitly open to objection (and subsequent appeal to court). In contrast, if a decision taken by a tax inspector is not explicitly subject to objection and appeal, its effects can only be challenged in court once these have led to an unfavourable tax assessment. This applies, for instance, with respect to an advance clearance or ruling request: if this is denied, the taxpayer has no legal remedy against that and can only await the first tax assessment resulting from the relevant fact pattern (or abandon from that pattern in light of the uncertainty regarding its tax consequences).

Apart from tax assessments, taxpayers may also challenge notifications determining the amount of tax losses, essentially 'negative' tax assessments. Moreover, the taxpayer may request (and, if necessary, challenge) formal decisions regarding the application of certain facilities, such as tax consolidation (fiscal unity) or rollover relief.

Nowadays, the tax inspector also has the possibility to issue an information notification, stating that a taxpayer has failed to comply with certain information obligations. If the taxpayer disagrees, that particular notification can be challenged, avoiding the need to await a tax assessment that is based on that missing information (or to litigate the matter before a general court without specific tax expertise).

iii Statute of limitations

As regards taxes that become due upon imposing an assessment formalising the obligation to pay (such as personal and corporate income tax), in principle the inspector must impose such assessment within three years after the end of the relevant financial year. If the taxpayer was granted an extension for filing the tax return for the said year, a similar period of extension applies to the deadline for imposing the related assessment.

Once a final tax assessment has been imposed, as a rule the tax inspector may no longer impose an additional assessment. However, at present a final assessment containing an apparent error can still be adjusted within two years of the date of such assessment, to avoid the possibility that taxpayers could benefit from evident mistakes within the tax administration.

Otherwise, the tax inspector may impose an additional assessment only if certain facts come to his or her attention that he or she could not be aware of previously (or if the taxpayer has acted in bad faith in relation to those facts). In any case, the statute of limitations expires within five years of the end of the relevant financial year (for certain foreign-source income this is increased by seven years), again adding any period of filing extension granted.

Likewise, as regards taxes that are not formalised through issuing an assessment (such as value added tax (VAT) and wage tax), the tax inspector can make an adjustment by imposing an additional assessment. However, also for these remittance-based taxes, the statute of limitations expires within five years of the end of the financial year during which the relevant tax liability arose (for certain foreign-source income this is potentially increased by seven years).

iv Start of investigation or dispute

Because tax return filings (and payments) nowadays are more or less automatically processed, increasingly the trigger point for the administration to start an investigation tends to be information coming to its attention, either through a (regular or specific) tax audit or more or less incidentally. Other than the statute of limitations for imposing additional assessments, there is no specific time frame for an examination to be concluded. In practice, assessments are often imposed just to prevent the expiry of the statute of limitations.

As before, the trigger point for the taxpayer to start a dispute continues to be the receipt of an assessment deviating from the return previously filed. As said, such assessment must first be challenged in an objection procedure, within six weeks of its date. If the administrative appeal is not (entirely) honoured by the inspector, the taxpayer may lodge an appeal with the (lower) district court against that decision. Depending on the court's verdict, subsequently the taxpayer or the inspector may lodge an appeal with the (higher) court of appeal.

Ultimately, the parties may appeal to the Dutch Supreme Court. Where the dispute mainly concerns the application of the law, parties may agree to skip the procedure before the court of appeal and go to the Supreme Court directly. The courts may also request a preliminary ruling on the relevant matter of law from the Supreme Court (i.e., within the context of a pending appeal).

In each instance, the appeal must in principle be launched within six weeks of the date of the government decision or court verdict that is the subject of the appeal.


i Administrative appeal procedure

As mentioned, the administrative appeal procedure is initiated by the taxpayer (i.e., by lodging an objection with the inspector). This must be done within six weeks of the date of the relevant decision (e.g., a tax assessment). If is lodged after the six-week term has lapsed, in principle the objection is inadmissible and the inspector's decision, therefore, becomes final. This will also be the case if the objection is not substantiated. However, to preserve his or her rights, the taxpayer may first submit a pro forma notice of objection (i.e., within six weeks) and substantiate that at a later stage.

To enhance the character of a reassessment, the decision on the objection must be taken by another tax inspector (i.e., not the same person that took the initial decision). Before that inspector decides on the notice of objection, the taxpayer is entitled to a hearing of the case. There are no filing costs or registration fees for lodging an objection.

Formally, the tax inspector is required to decide on the objection within six weeks of the moment the period of lodging it expired, meaning that in principle the objection phase should take no longer than 12 weeks from the date of the original decision that is being challenged. However, the inspector is still allowed to unilaterally extend this period by an additional six weeks, taking the maximum time frame for dealing with the objection up to 18 weeks. Further extension can be agreed upon by the parties.

If the tax inspector does not decide within the statutory (or agreed) period, in principle the taxpayer can take formal steps to force a decision in the appeal procedure. However, in practice this only happens in exceptional cases.

ii Appeal and higher appeal proceedings before the tax courts

If the inspector decides not to (or not entirely) honour the objection, the taxpayer can lodge an appeal against that decision with the district court. In that instance, a registry fee becomes due.

Again, the notice of appeal must be submitted within six weeks of the date of the decision by the inspector in the administrative appeal procedure. If lodged after six weeks, the appeal may well be inadmissible. Again, to be admissible the appeal must also be substantiated, although to preserve rights the taxpayer may first submit a pro forma appeal (i.e., within six weeks) and substantiate that at a later stage (within the time frame granted by the court).

Once the substantiated notice of appeal has been submitted, the court will send it to the tax inspector, who will be allowed a certain time frame for submitting his or her statement of defence. Depending on the complexity of the case, a second written round may be requested.

The parties must be invited to attend the court hearing at least three weeks in advance. However, if the parties consent, the court may refrain from a hearing. Each party may submit additional documents until 10 days before the hearing. In tax matters, the court's hearing is typically held behind closed doors. Nonetheless, eventually the court's decision will be published, albeit it in anonymous form. At the courts, the taxpayer may represent himself or herself; representation by an attorney (or a tax adviser) is not mandatory.

The district court rules both on the facts of the case and the application of the law. Although the term of its ruling can be extended (which is often the case), in principle the district court must render its verdict within six weeks of the date of its hearing or otherwise inform the parties with respect to the delay.

Both the taxpayer and the inspector can appeal against the (lower) district court's verdict at the (higher) court of appeal. Again, the term for lodging such 'higher appeal' is six weeks from the date of the decision of the district court. The rules that apply to the higher appeal are more or less similar to those that apply to the initial appeal at the district court. Like the district court, the court of appeal rules both on the facts and the law.

iii Rules of evidence

In proceedings before the tax courts, the judges are not bound by any specific rules of evidence. Thus, subject to the requirement that its findings must be comprehensible, the courts may assess the evidence provided by the parties freely. Unlike in civil proceedings, in tax proceedings the courts tend to play quite an active role in exploring the relevant facts.

Based on case law, the burden of proof typically lies with the party that claims something. For instance, normally the inspector must provide evidence for a profit adjustment, while the taxpayer must substantiate a deduction or exemption claimed. In any case, the burden of proof must be apportioned between the parties reasonably. This implies that if one party has exclusive access to certain relevant information, that party must produce the required evidence even if the burden of proof would normally be with the other party.

In specific cases, the General Tax Act provides for a reversal of the burden of proof; for instance, if a required tax return has not been filed in a timely manner. Furthermore, the inspector may issue an information notification stating that in his or her view the taxpayer fails to meet obligations to provide information or documentation, or to keep an adequate administration. As such, this information notification may be challenged as well. However, should the notification become final, as a consequence the taxpayer may face a reversal of the burden of proof in the main case.

In relation to the tax inspector's decision to impose a penalty on the taxpayer, a reversal of the burden of proof is not allowed.

iv Supreme Court proceedings

An appeal to the Supreme Court (a procedure known as 'cassation') can be launched both by the taxpayer and the tax authorities (in that instance, the Dutch State Secretary for Finance replaces the inspector as a party to the proceedings). The aim of this procedure is mainly to preserve legal uniformity and steer the development of law. However, the procedure may also safeguard legal protection as it might function as a quality check on the contested judgment, both as regards the application of the law by the court and the logic of its reasoning.

The procedure with the Supreme Court differs from an ordinary appeal in that not every aspect of the case can be reconsidered: within the Dutch legal system. The Supreme Court must base its decision on the facts established by the courts and may not examine these facts all over again.

Proceedings before the Supreme Court are almost entirely in written form. In tax cases, the taxpayer may lodge the appeal and submit its grounds, and must be represented by an attorney when pleading before the Supreme Court.

If the Supreme Court decides to honour the appeal, it may refer the case back to another court for further handling. However, the Supreme Court may render final judgment if no significant questions of fact remain undecided.

v Extension of payment

Payment of the contested amount of the tax assessment is not automatically extended through initiating judicial proceedings. Instead, the taxpayer must request the tax collector for extension of payment. This is typically granted until the moment that particular procedure ends, meaning that in each instance, the taxpayer must again request for extension of payment.

The tax collector may request security (e.g., a bank guarantee or a right of pledge) for the amount of tax left unpaid. If the litigious tax assessment also includes an amount that is not disputed, such amount must be paid in accordance with the term stipulated in the relevant tax assessment. Interest is calculated on any unpaid amount of tax. However, if the taxpayer initially pays the tax, any refund of tax obtained if the appeal is honoured will not bear interest.


i Criminal penalties

Severe criminal offences in the sphere of taxation may well result in prosecution before a criminal court. This is handled by the public prosecutor's office, not the tax administration.

As regards the potential sanctions in criminal proceedings, a distinction must be made between a misdemeanour and a – more serious – offence. In the first case, the sanction tends to be just a penalty, in the latter case, a jail sentence can be imposed as well.

ii Administrative penalties

Less severe offences in the sphere of taxation are dealt with by the tax authorities through administrative penalties. In this regard, a distinction must be made between situations of default and situations of wilful misconduct or gross negligence.

In case of default, the administrative penalty is set at a maximum of €5,278 for failure to file the required tax return in a timely manner (for taxes due upon an assessment, such as corporate and personal income tax) or failure to pay remittance-based taxes in a timely manner (such as wage tax, VAT or dividend tax). As regards the latter category, a default penalty may still be imposed if the amount of tax is paid in a timely manner, but the corresponding tax return is not submitted in a timely manner. In that case the maximum penalty is €1,319 for failure to file a wage tax return and €131 for failure to file a VAT or dividend tax return.

In the case of wilful misconduct or gross negligence, administrative penalties are generally set at a maximum of 100 per cent of the amount of the assessment or the tax not paid. Note that the maximum increased to 300 per cent in specific cases concerning tax evasion by private individuals.

In relation to taxes levied by way of assessment, a penalty may be imposed if the required tax return is intentionally not (or incorrectly or incompletely) filed or the tax assessment is otherwise set too low owing to wilful misconduct or gross negligence on the side of the taxpayer. Specifically, in relation to a request for (revision of) a preliminary tax assessment, a penalty may be imposed if information or documentation is intentionally not (or incorrectly) provided.

In relation to remittance-based taxes, a penalty may be imposed if the amount of tax due is not (in a timely manner and entirely) paid, owing to wilful misconduct or gross negligence on the side of the taxpayer.


i Recovering overpaid tax

If a taxpayer has overpaid taxes, an objection can be lodged within six weeks of the date of: (1) the assessment (for taxes levied based on an assessment imposed by the tax inspector); or (2) payment (for remittance-based taxes levied on the basis of self-assessment). If the term to lodge an objection has already passed, the taxpayer may request the tax inspector for an ex officio reduction or an ex officio refund. Based on a policy decree, a tax inspector is generally authorised to grant an ex officio reduction or refund over the past five years. However, it is not possible to lodge an objection against a decision to deny a request for an ex officio reduction or refund.

ii Challenging administrative decisions

In the event an administrative decision is not made in accordance with principles of good governance, such as the principle of legitimate expectations, the right to equal treatment and the principle of fair play, the decision can also be challenged purely on the basis of those principles. Thus, if an assessment is not in line with commitments previously made or with a point of view explicitly determined towards a taxpayer (or group of taxpayers) or if a certain decision is not in line with official policy, the taxpayer can invoke the principle of good governance in that regard.

iii Claimants

In principle, only the person paying a remittance-based tax or receiving a tax assessment or another decision open to administrative appeal can challenge such payment, assessment or decision. Other stakeholders can only challenge these assessments in exceptional circumstances.


As regards the administrative appeal procedure, the taxpayer is entitled to reimbursement of legal expenses incurred if the tax inspector honours the objection lodged. However, to that end the taxpayer must request reimbursement before the inspector renders his or her decision on the notice of objection. Even then, the compensation is significantly restricted by law and concerns a fixed amount that is often just a fraction of actual costs.

In the case of an appeal to the courts, in any case the court registry fee will be refunded if the court rules (wholly or partially) in favour of the taxpayer. At the request of the taxpayer, the court may also rule that the tax authorities must reimburse the taxpayer for (legal) expenses incurred in relation to the procedure. Also, in this instance, the taxpayer must explicitly request a reimbursement of costs in the court proceedings. As with the legal expenses incurred in the administrative appeal procedure, the amount of compensation is fairly limited and normally concerns a fixed amount provided for in the law. Even though the courts may deviate from those fixed amounts, they tend to do so only in very exceptional cases.


i Advance tax rulings and advance pricing agreements

Within the framework of the Dutch ruling practice, taxpayers may seek to obtain certainty in advance from the Dutch tax authorities with respect to the tax consequences of their (contemplated) investments in – or via – the Netherlands. Following criticism regarding the standardised way in which rulings were previously granted, back in 2001 the Dutch ruling practice was significantly reformed. Since then, rulings are aligned with the international approach developed within the Organisation for Economic Co-operation and Development (OECD) framework and may either take the form of an advance tax ruling (ATR) or an advance pricing agreement (APA).

Even though there is no legal time limit for requesting or obtaining an ATR or an APA, the Dutch tax authorities tend to apply internal policies as regards the duration of the rulings.

Filing a request for an ATR or an APA does not constitute any legal obligation for the tax authorities to formally respond to the request: applications can be denied at discretion, and such decision is not subject to objection or appeal.

Taxpayers may apply for an ATR to obtain advance certainty with respect to the tax consequences of certain specific structures and transactions, such as the application of the Dutch participation exemption or the presence (or absence) of a permanent establishment. Likewise, with respect to matters of transfer pricing, taxpayers may conclude an APA with the Dutch tax authorities, confirming the 'arm's length' nature of the conditions applied for their related-party transactions.

Today, the Dutch ruling practice is quite mature, and the ruling process is relatively efficient, particularly if measured by international standards. The current ATR/APA practice is laid down in various administrative decrees, providing the competent tax inspector and the taxpayer with technical and administrative guidelines to be complied with in the process.

Both types of rulings can be described as a settlement agreement, namely a written compromise on the interpretation of certain legal provisions as they apply to a specific taxpayer within the context of a proposed arrangement or set of arrangements. Such a settlement agreement is normally concluded on a case-by-case basis.

Rather than being a prerequisite for obtaining specific tax treatment essentially deviating from applicable Dutch tax law, tax rulings should be perceived as a confirmation of the views and interpretation of the Dutch tax authorities regarding a specific fact pattern in view of legislation in force and applicable case law. Consequently, rulings should not provide advantageous tax treatment to individual taxpayers. As recent developments show, this process is closely monitored by the European Commission, which aims to take away any such advantages by applying the EU state aid doctrine.

ii Mutual agreement procedures and arbitration

Under most tax treaties, potential cases of double taxation can be resolved through a mutual agreement procedure between the competent authorities of both treaty states. Even though the Dutch tax authorities are known to invest considerable time and effort in those procedures, clearly the downside of the standard mutual agreement procedure is that it does not necessarily lead to an outcome, let alone an outcome that completely eliminates the double taxation. Besides, normally the taxpayer cannot initiate a mutual agreement procedure; in fact the taxpayer is not (formally) involved in the procedure at all.

Within the European Union, specifically as regards the elimination of double taxation in connection with the adjustments of profits of associated enterprises, Convention 90/436/EEC, known as the Arbitration Convention, already provides for binding arbitration in connection with transfer pricing adjustments. The Netherlands was one of the first signatories to the Arbitration Convention and since then has always advocated the inclusion of binding arbitration clauses in double tax conventions, not just its own bilateral treaties, but also at a supranational (EU) and multilateral (OECD) level.

The recent implementation of a Directive creating a framework for resolving all sorts of disputes potentially resulting in double taxation within the EU enhances legal protection for taxpayers across the EU. More specifically, the possibilities for resolving disputes between Member States arising from the interpretation of double tax conventions have increased as dispute resolution mechanisms are required to be mandatory and binding, with clear time limits and an obligation to reach results.

The relevant procedures entail that a mutual agreement procedure can be initiated by the taxpayer, under which Member States must reach an agreement within two years. If the procedure fails, an arbitration procedure is launched to resolve the dispute within specified timelines. For this, an advisory panel of three to five independent arbitrators is appointed together with up to two representatives of each Member State. The panel (also known as 'advisory commission') issues an opinion for eliminating the double taxation in the disputed case, which is binding on the Member States involved unless they agree on an alternative solution.

iii Mediation and settlement

In the Netherlands, there other alternative methods of resolving tax disputes. Apart from the well-known settlement agreement, since 2005, mediation in tax disputes has been used by the Dutch tax authorities as well.


Even though there is no general definition of tax avoidance in the Netherlands, Dutch tax law does contain the unwritten doctrine of abuse of law (fraus legis). This doctrine enables the tax authorities (and hence the courts) to eliminate or substitute a certain legal arrangement if the relevant arrangement: (1) was entered into for the sole purpose of saving tax (and, thus, does not serve any other purpose); and (2) would lead to an outcome that would be in contradiction with the objective and purpose of the law if it were respected.

If the abuse of law doctrine is evoked successfully, the tax position will again be established on the basis of the fact pattern as it results from the application of that doctrine, namely by eliminating or substituting the relevant legal arrangement. An example of a successful application of the abuse of law doctrine was confirmed by the Dutch Supreme Court in its April 2017 ruling in the Credit Suisse case.

In addition to the abuse of law doctrine, over the past decades, many specific anti-abuse rules have been introduced, particularly because application of the abuse of law doctrine by the Dutch tax courts was not always found satisfactory by the tax authorities. This has led to (and affected) various tax provisions, notably those in relation to interest deduction and loss compensation.


The Netherlands has one of the most extensive networks of double tax conventions in the world. Because double tax conventions generally provide for a substantial reduction of foreign withholding taxes that would otherwise be due on dividend, interest and royalty payments, increasingly there is some political pressure (both domestically and coming from abroad) on the Netherlands to take measures against structures set up to benefit from the Dutch treaty network while the incoming payments are largely passed on to entities based in tax haven jurisdictions. To avoid such abuse of the Dutch treaty network, the new Dutch coalition government is considering the introduction of a specific 'anti-abuse' withholding tax on dividends, interest and royalty payments to certain tax havens.

In addition, the interpretation and application of double tax conventions, as well as the EU Parent–Subsidiary Directive may be expected to become subject to a more stringent anti-abuse approach under the influence of the General Anti-Abuse Rule (GAAR) laid down in the Anti-Tax Avoidance Directive (ATAD) established at EU level. The GAAR provides for a number of criteria to ignore an arrangement or a series of arrangements for the purpose of determining the taxable amount. Two of these can also be derived from the abuse of law doctrine as applied in Dutch case law, namely that: (1) the main purpose or one of the main purposes of the arrangement is obtaining a tax advantage (the 'subjective criterion'), which (2) would conflict with the object or purpose of the law if the arrangement were respected (the 'objective criterion').

Under the GAAR included in the ATAD, there is a separate third criterion for tax avoidance, being that the relevant arrangement is, or series of arrangements are, not genuine with regard to all relevant facts and circumstances. However, in the view of the Dutch tax authorities, the absence of valid commercial reasons that reflect economic reality is also relevant when it comes to the subjective criterion that is part of the abuse of law doctrine. In other words: absent valid commercial reasons that reflect economic reality, tax avoidance has to be one of the main purposes of putting the relevant arrangement in place. Because case law from the European Court of Justice (ECJ) provides that a Member State may implement a directive through an existing general legal framework that can be interpreted as consistent with the relevant provisions of the directive, the Netherlands may take the view that the GAAR is already implemented by means of the abuse of law doctrine.

Moreover, the Netherlands adheres to the OECD's base erosion and profit shifting (BEPS) proposals, notably BEPS Action Item 6, which has meanwhile resulted in the Multilateral Instrument (MLI). In relation to this MLI, the Netherlands has opted to apply the principal purpose test (PPT) for determining whether evoking a certain tax treaty must be considered abusive. In fact, recent legislation more or less codifies the PPT into Dutch domestic (dividend) tax provisions.

Therefore, it can be said that the attitude of the Netherlands towards international anti-avoidance initiatives is generally quite cooperative. Even though certain double tax conventions concluded by the Netherlands already contain an anti-abuse rule, the roll-out of the MLI with its PPT is expected to increase the importance of the anti-abuse element significantly.

Finally, as regards the exemption from VAT for collective investment management activities, based on case law from the ECJ an additional requirement for exemption is that the relevant activities are subject to 'specific state supervision'. Even though the unexpected introduction of this additional requirement initially caused some commotion in the fund management industry, by now in most countries (including the Netherlands) there is more clarity as to what this implies from a financial regulatory point of view.


As is the case in many countries worldwide, increasingly transfer pricing is becoming an area of focus for the Dutch tax authorities. Also, in this respect, the OECD's BEPS proposals play a pivotal role, notably BEPS Action Item 13, which has meanwhile resulted in the country-by-country reporting rules.

In general, owing to the increased international cooperation in the field of exchange of information particularly regarding transfer pricing, both at the supranational (EU) and multilateral (OECD) level, it is expected that the obstacles to challenge the policies applied by multinational enterprises will gradually diminish.


In practice, it is expected the policy and the attitude of both the tax authorities and the courts will increasingly lean towards application of the anti-abuse doctrine. As the anti-avoidance aspect comes to the forefront, the literal wording of the law may become less important. Clearly, that has the potential downside that the aspect of legal certainty may be ignored.

Furthermore, the recent implementation of EU Directive 2018/822 amending Directive 2011/16/EU with respect to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (commonly referred to as 'DAC6' or the 'Intermediaries Directive') introduces mandatory disclosure rules that will affect the system of dealing with tax disputes in the Netherlands, particularly in relation to the potential assessment of penalties. As clarified by the Dutch Supreme Court in its April 2017 ruling in the Credit Suisse case, at present the main question is whether the taxpayer had a reporting position when filing its tax return. Now that mandatory disclosure rules have become the new standard within the EU, slowly but surely the paradigm will shift to the question of whether a certain scheme or position had to be disclosed up front to the tax authorities. This may be particularly problematic as the scope of cross-border arrangements to be reported is relatively broad and may lead to extensive reporting obligations for both intermediaries and taxpayers. Under the Directive, reporting obligations are triggered by certain 'hallmarks' (characteristics) covering a relatively wide range of cross-border arrangements.

Otherwise, there are no indications that the Netherlands will soon see any significant proposals for legislative change in the area of dealing with tax disputes and tax litigation. There would seem to be no need for such system change either, as legal protection in tax matters in the Netherlands is already perceived as quite adequate.


1 Paul Kraan is a partner at Van Campen Liem.