NETHERLANDS: Tax avoidance in the Netherlands: Significant progress following new measures

The Netherlands has made significant strides in reducing tax avoidance, with recent measures showing promising results.

The government’s ongoing efforts, both at a national and international level, have successfully curbed tax evasion tactics used by multinational companies. With effective legislative changes and international cooperation, the country is seeing a substantial decrease in profit shifting and tax avoidance strategies.

Effective measures reduce tax avoidance by €5 billion in the Netherlands
The introduction of new regulations has directly impacted tax avoidance practices, with notable success in limiting profit shifting. One key measure, aimed at curbing businesses’ ability to move profits to affiliated companies in low-tax jurisdictions, has resulted in a reduction of €5 billion in profits being shifted. This is a clear indication of the effectiveness of the Dutch government’s approach in addressing corporate tax avoidance.

Combatting hybrid structures and interest payments

A notable development has been the successful reduction of hybrid structures, such as the ‘CV/BV’ model, which allowed businesses to defer taxes indefinitely. With the implementation of Anti-Tax Avoidance Directives (ATAD), particularly the first and second versions, the Netherlands has seen a significant reduction in the use of these structures. As a result, American companies, in particular, are booking less commercial profit in the Netherlands, marking a successful blow to tax avoidance schemes.

Collaboration with EU and OECD enhances global anti-tax avoidance efforts
On the European front, the fight against tax avoidance continues with the implementation of the FASTER directive. This legislation empowers EU member states to reject withholding tax refund requests that may be linked to tax abuse. Furthermore, the system for exchanging tax-related information has expanded to include cryptocurrencies, ensuring broader transparency and tighter regulation.

On a global scale, the Netherlands has actively participated in international tax reform through the OECD/G20 Inclusive Framework. These efforts have culminated in the introduction of the Minimum Tax Rate Act 2024, which aims to ensure that multinational corporations are taxed fairly in the countries where their consumers and users are based. The Netherlands remains committed to reinforcing global tax rules and combating aggressive tax avoidance on a global scale.

Long-term impact of anti-tax avoidance policies expected to drive continued progress
Despite the success so far, the Netherlands continues to assess the full impact of its anti-tax avoidance measures. Additional steps, including a withholding tax on dividends paid to low-tax countries, are yet to show their full effects. However, the ongoing evaluation and adjustments to these policies suggest that the country is on track to continue reducing tax avoidance practices in the coming years.

With these groundbreaking initiatives, the Netherlands is setting a strong example for other nations looking to tackle corporate tax avoidance while ensuring the integrity of their tax systems.