Article 8bd CITA was introduced on 1 January 2022, as part of the legislation which aims to prevent double non-taxation through transfer pricing mismatches. The measure aims to prevent double non-taxation due to a difference in valuation in the event an entity affiliated with a Dutch taxpayer transfers an asset to the Dutch taxpayer by means of a capital contribution, a profit distribution, a repayment of paid-up capital, liquidation distribution or a similar legal act. If a Dutch taxpayer acquires an asset through a capital contribution from an affiliated entity that is subjectively exempt from a profit tax or is domiciled in a jurisdiction where the entity is not subject to a profit tax, literal application of Article 8bd CITA implies that the Dutch taxpayer must book the asset at a value of nil.
This decree clarifies that capital contributions and distributions to a Dutch taxpayer by transferors which are not subject to a profit tax are not affected by article 8bd CITA, provided that the fair market value is included in the legal documentation and both parties’ financial statements.
Decree
Provided that Article 8bd CITA is applicable, the Dutch tax inspector will apply the following interpretation in appropriate cases.
If a Dutch taxpayer acquires an asset through a capital contribution from an affiliated entity that is subjectively exempt from a profit tax or is domiciled in a jurisdiction where the entity is not subject to a profit tax, Article 8bd CITA will not apply in the event that both in the legal documentation of the capital contribution and in the financial statements of both the transferor and the Dutch taxpayer, the capital contribution is recognized against fair market value.
This explanation shall apply mutatis mutandis to the transfer of an asset by means of a profit distribution, repayment of paid-up capital, liquidation distribution or a similar legal act.
This decree has entered into force as of January 25, 2023. The full text of the decree (in Dutch) can be found here.
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