Netherlands – EC decision to investigate transfer pricing arrangements
November 14: The European Commission (EC) today released a “non-confidential version” of its June 2014 EC decision to open an in-depth investigation concerning whether certain transfer pricing arrangements of a multinational entity with the Dutch tax authorities constitute state aid that is contrary to EU law.
The investigation is identified as SA.38374. Read text of the 40-page decision under SA 38374 [PDF 899 KB] as delivered to the government of the Netherlands.
The Netherlands Ministry of Finance today also issued its response to the EC decision to open an investigation in this matter. Read the Dutch authorities’ response.
According to the Dutch Ministry of Finance, the EC is investigating the advance pricing agreement (APA) between the Dutch corporate entity and the Dutch tax authorities in connection with possible state aid. Under the APA, arm’s length remuneration was agreed for the activities performed in the Netherlands by the Dutch taxpayer for its multinational group. The EC expressed doubts and will investigate three elements of the APA:
The qualification of the Dutch taxpayer as a low-risk contract manufacturer while concluding the APA
Whether the Dutch tax authorities were right to accept two adjustments to the cost base by the tax consultant, arising from the qualification of the Dutch taxpayer as a contract manufacturer
Whether the Dutch tax authorities were right to accept the Dutch taxpayer’s calculation of royalties (the EC believes this calculation does not reflect the value of the intellectual property rights because the royalties are linked to the difference between the remuneration agreed in the APA and the pre-tax accounting profit before payment of royalties)
Because of these doubts, the EC believes that the APA might not comply with the arm’s length principle. It therefore believes that the Dutch government may have granted a selective advantage that qualifies as state aid, and will now investigate further whether state aid has actually been provided.
