The Netherlands and Germany have signed a new agreement for exchange of information on advance pricing agreements and advance tax rulings. The two countries has thus mutually agreed to exchange information included in the signed Advanced Pricing Agreements if their provisions impact taxation in the other state. Germany and the Netherlands have also signed a new double tax treaty which is expected to enter into force in January 2016. These provisions of these treaties affect German foreign investors in the Netherlands and vice versa.
Spontaneous exchange of information
The Netherlands and Germany have agreed that the exchange of information in advance pricing agreements and advance tax rulings will be “spontaneous”. This is an important step for obtaining greater transparency on tax rulings. The two countries have agreed to inform one another on advance pricing agreement concluded with other countries (even non-EU countries) if the provisions of such treaties affect them in terms of taxation.
The agreement applies to tax information relating to the 2015 calendar year and from now on. The two countries may also agree to conclude an agreement which will allow the exchange of information relating to earlier years, although this is yet uncertain.
One reason for signing this agreement was the “Luxembourg Leaks” scandal which took place earlier in 2014. The investigation revealed preferential tax rulings for certain companies and various tax avoidance schemes. Dutch and German officials now hope that a better transparency and communication between them will allow the two states to ensure proper taxation under their own taxation laws
Advance pricing agreements
An advance pricing agreement (APA) is a bilateral or multilateral agreement between a taxpayer and a tax authority regarding the appropriate transfer pricing methodology/ the company-related transactions. These agreements help solve potential transfer pricing disputes in a cooperative manner.