The Dutch Ministry of Finance published a transfer pricing decree on 1 July 2022, replacing the prior version from 2018, but also retracting the prior guidance on the use of a spread for financial services companies, so-called financial intermediaries (‘Dienstverleningslichamen’ or DVLs), in a questions and answers decree from 2014.
This new decree provides further guidance on the application of the arm's-length principle and the Dutch Ministry of Finance’s view where the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD guidelines) leaves room for interpretation but also reflects a fundamental change to the way transfer pricing is dealt with for financial intermediaries.
Takeaway: The new decree is a narrower interpretation of the arm’s-length principle and emphasizes the importance of both control over risks and the financial capacity to bear such risks. This is expected to result in more discussions between the Dutch tax authorities and taxpayers in practice, especially as to intercompany financial transactions, and could possibly lead to double taxation. It is therefore critical that companies revisit their policies for financial transactions in general and more specifically the transfer pricing of financial intermediaries and any guarantees provided for third-party debt across the group.