Consultation bills on informal capital and reverse hybrids (ATAD2) published

The Dutch Government published two consultation documents and the third one is to follow shortly:

  1. Amendment to arm’s length principle / informal capital structures as of 1/1/2022: the Government intends to limit downward transfer pricing adjustments in the Netherlands if there is no corresponding pick up that is subject to tax in another country. This rule also applies to transfers of assets, such as IP. A grandfathering rule should apply to assets that were transferred within 5 years before 1/1/2022: only the depreciation is limited, but not the book value.
  2. Reverse hybrid entities (ATAD2): as of 1/1/2022 reverse hybrid entities will become subject to tax. The consultation document sets out the details of the implementation.
  3. Entity classification rules (e.g. CVs & other transparent entities): a third consultation document that is meant to change the Dutch legal entity classification rules will follow within the next 4 weeks. These rules aim to prevent unnecessary hybrid mismatches by making the Dutch legal entity classification rules more in line with the international standard.

Only after the consultation phase, a legislative proposal will be published.