The Dutch competent authority may, under certain conditions, grant a discretionary exemption outside the 5-year period if an amicable agreement is reached. The decree divides the procedure itself into three phases: the pre-consultation phase, the consultation phase and the post-consultation phase. The Netherlands takes the protection of taxpayers` rights in international tax law seriously, regardless of the Tax Arbitration Act, all Dutch tax treaties allow for a mutual agreement procedure. In addition, the new policy includes a description of how the competent Dutch authorities will deal with the mutual agreement procedure in triangular cases. On 22 June 2020, the Deputy Minister of Finance issued a decree updating the procedures of mutual understanding (Besluit Onderlinge overlegcedures). Tax professionals believe that the new decree provides a welcome explanation and clarification of existing laws and regulations regarding mutual understanding procedures. Dutch taxpayers now have a better idea of the solutions available to avoid double taxation. An important recognition in this decree is the explicit reference to a 2017 judgment of the Amsterdam District Court, in which the initial refusal of the Dutch tax authorities to admit the taxpayer to a MAP procedure was described as a decision. Such a refusal is therefore admissible for an opposition and an appeal before the administrative court. Therefore, according to the Deputy Minister, legal proceedings may be commenced outside of the Tax Dispute Resolution Mechanisms Act. The POP Decree applies to all applications for the opening of a POPs; specifically. both those relating to transfer pricing cases and other so-called interpretative cases. The latter category includes procedures for determining a company`s domicile under a tax treaty, also known as MAP tie-breaking cases.
The Netherlands has chosen to apply the MAP tiebreaker option under the MI. On 20 December 2019, the Dutch Minister of Finance also issued a decree on MAP tie-breaking rules for dual national residents, which will enter into force on 1 January 2020.3 The MAP Decree also refers to the possibility for a taxpayer to request the DCA to engage in BAPA or MAPA discussions with other jurisdictions in order to prevent or resolve (potential) tax disputes based on the tax treaty. applicable. In this regard, a BAPA or MAPA may also cover transactions that have already been carried out and requested for years of restoration, provided that the facts and circumstances have remained comparable and that the other jurisdictions agree to follow this procedure. It also confirms that the criteria for applying for a bilateral or multilateral advance pricing agreement (ABS) are the same as for applying for a unilateral ABS. The exact timing and deadlines of the mutual agreement procedure under bilateral tax treaties differ, while the Tax Arbitration Act and the EU Arbitration Convention provide for a standard procedure for the mutual agreement procedure. The EU Tax Arbitration Act and Arbitration Convention apply only to EU member states, while the Netherlands has bilateral tax treaties with around 90 jurisdictions, all of which contain a provision allowing for the opening of mutual agreement proceedings. An important feature of the DTA is that taxpayers can enforce arbitration if the competent authorities have not found a (potential) solution during the POPs within the prescribed period of two (or three) years. Taxpayers can ask the competent authorities to move to the conciliation phase and even to apply this step through legal proceedings. Submitting an application under the DTA is often attractive to taxpayers compared to reporting under a bilateral tax treaty or the EU Arbitration Convention.
The applicable bilateral tax treaty between the Netherlands and another country does not always contain an arbitration clause, although the Dutch tax treaty consists of including such a clause in its tax treaties. The EU Arbitration Convention contains an arbitration clause for a period of two years from the date on which the POPs application is considered complete. Compared to the DTA, the EU Arbitration Convention covers only transfer pricing cases and does not offer taxpayers the possibility of applying arbitration by a national court if both competent authorities reject the POPs request, nor does it offer the possibility of requesting arbitration if one of the competent authorities rejects the request. Under the new Directive, mutual agreement proceedings can be initiated under the Tax Arbitration Act, a bilateral tax treaty or the EU arbitration convention. According to the Tax Arbitration Act, bilateral tax treaties containing an arbitration clause and the EU arbitration agreement, arbitration can be initiated on the taxpayer`s initiative if the mutual agreement procedure does not lead to the (full) settlement of the dispute and the required period (usually two or three years) has expired. . . .