In The Netherlands
Transfer Pricing in the Netherlands; Intra-Group transactions
Transfer pricing is an important tax aspect, when expanding your company overseas, and performing transactions within your Group.
When independent parties do business, a fair price will be established by the free market. This could be different when affiliated businesses (within the same Group) do business, abd set prices and conditions that no third party would accept. This is when business is conducted between related entities must be performed according to the arm's length principle..
Transfer pricing methods
Taxpayers may choose from all of the, in the guidelines, mentioned methods. The OECD mentions the following transfer pricing methods to comply with the arm’s length principle:
The comparable uncontrolled price method;
The resale price method;
The cost-plus method;
The transactional profit split method;
The transactional net margin method.
As mentioned above, taxpayers can choose the method best suitable for their business.
It is also possible to get an advanced ruling on transfer pricing. Meaning that taxpayers can have a consult with the Dutch tax authorities in order to make an agreement about the cross border activities of their related companies. In general, an advance tax ruling is treated as a binding opinion from the Dutch tax Authorities based on the facts and circumstances applying to all intra-group transactions. The ruling is binding only with respect to the activities specified in the ruling; if the actual facts and circumstances deviate, the ruling will be cancelled. These kinds of rulings are generally valid for a specified period and can be terminated in a number of cases.
The Dutch tax Authorities only consult with businesses having enough substance in The Netherlands. (please also check our article about substance)
Transfer pricing documentation
Related companies must include in their administration a description of how prices are calculated between them. This calculation has to prove that the prices comply with the arm’s length principle.
Next to this, there are extra requirements for multinational group companies with a consolidated group turnover of € 750.000.000. These companies need to file an annual country-by-country report. In addition, Dutch taxpayers that are part of a multinational group with a consolidated turnover of at least € 50.000.000 must draw up a so-called ‘’ master file’’ and a ‘’local file’’.
Please note that: With effect from 1 January 2017, EU Member States are obligated to automatically exchange information on advance cross-border tax rulings and advance pricing arrangements.
Don't hesitate to contact INCO for more information about transfer pricing. We can also help your company obtaining an advanced ruling with the Dutch Tax Authorities
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