Comparison with the 2013 Decree
The main changes included in the new Decree are listed below:
- A clarification on the process of accurately delineating intercompany transactions;
- An additional explanation on the application of transfer pricing methods in specific situations;
- Adjustments to the section on the pricing of transactions involving intangibles for which valuation is highly uncertain at the time of the transaction;
- A new section on ‘hard-to-value’ intangibles, and
- A new section on the purchase of shares from an unrelated party followed by an internal business restructuring.
The new Decree replaces the 2013 Decree in order to align it with the 2017 OECD Transfer Pricing Guidelines. Also, it provides guidance on the vision of the Dutch State Secretary of Finance on the 2017 OECD Transfer Pricing Guidelines. The main new items are briefly discussed below:
- With respect to the DEMPE functions, it is indicated that the development and enhancement functions are - in general - the most important functions.
- In the case of hard-to-value intangibles the Dutch Tax Authorities can determine the arm’s-length nature of transfer / licensing of intangibles based on actually realized financials. When significant changes between the budgeted and actual financials have occurred, the Dutch Tax Authorities can, retroactively, question the arm’s-length nature of the transaction. Such a significant change occurs when the difference between the budgeted and forecasted financials exceeds 20 percent.
- When shares are purchased from an unrelated party, followed by a business restructuring (i.e. the internal sale of intangibles), the purchase file is considered an essential part of the transfer pricing documentation supporting the value of the transferred intangibles.
Should you have any questions about the new Decree, please contact Frank Schwarte (transfer pricing partner at Atlas).