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Silicon Valley Issues Netherlands With Tax Warning

by Ulrika Lomas, Tax-News.com, Brussels

30 August 2016


A coalition of Silicon Valley tech companies has urged the Dutch Government against making changes to the most "attractive" features of its corporate tax regime, warning that it risks damaging its traditionally strong tax competitiveness by doing so.

The Silicon Valley Tax Directors Group (SVTDG), which includes more than 80 Silicon Valley-based firms, made the recommendation in a letter sent to Prime Minister Mark Rutte in May 2016 and published by Dutch business daily Financieele Dagblad on August 29.

The letter was written following a visit by Rutte to Silicon Valley earlier in 2016, during which he asked the SVTDG how the Netherlands could maintain and improve its competitiveness.

In their reply, the tax directors advised the Government to "maintain the attractive features of the Netherlands tax regime." These include easy access to the Netherlands tax authorities; the ability of companies to obtain advanced tax rulings; the favorable participation exemption regime; the extensive double tax treaty network; the absence of withholding tax on interest and royalties; and incentives for research and development, including the R&D tax credit and the innovation box.

The letter also cited the special tax regime for skilled expatriate workers, known as the 30 percent ruling, under which employees are granted a tax free allowance equivalent to 30 percent of the gross salary.

"The SVTDG believes that all of these features of the Netherlands business tax regime have been important drivers to attract US investors to the Netherlands," the letter stated. "The elimination of one or more of these features will adversely impact both existing US investments as well as the flow of new US investments into the Netherlands."

The group placed high emphasis on the stability and certainty provided by the Netherlands' system of tax rulings, "which has been so important to attract foreign investments to the Netherlands," and observed that the recent state aid investigations by the European Commission into certain Dutch tax rulings had created much uncertainty among investors.

"Tax rulings are an important instrument to obtain legal certainty, which is particularly relevant if long term capital commitments are being considered by investors in the Netherlands," the letter noted. "A discontinuation of the ruling practice without reasonable alternatives being available will harm the Netherlands investment climate, resulting in reduced foreign investments and a loss of jobs."

The Silicon Valley firms also called on the Government to reduce the Netherlands' 25 percent corporate tax rate and bring it more into line with competitors such as Ireland, Switzerland, and the United Kingdom.

According to the group, the United States has been a major source of investment for the Netherlands for many years, supporting a total of 450,000 jobs and five percent of the country's gross domestic product. The Group therefore urged the Government to "carefully consider the pros and cons of any change to the current business tax regime."

The warnings were sounded by the SVTDG as the Netherlands considers changes to its corporate tax regime to fall into line with new standards promoted by the OECD under its base erosion and profit shifting project, and the European Union under its various anti-avoidance initiatives.

The SVTDG was formed to promote "sound, long-term tax policies that support competitiveness."

"Members of this group believe that tax policies should enhance opportunities for productivity growth by encouraging and rewarding enterprises that develop goods and services that meet international market standards," the group explains in the letter. "The companies represented by the group are dependent on research and development in order to remain on the cutting edge of technology innovation and to compete in the international market place."

TAGS: tax | investment | business | European Commission | Ireland | Netherlands | interest | royalties | employees | corporation tax | United Kingdom | withholding tax | Switzerland | United States | standards | services | research and development | Europe | Tax | BEPS

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