Proposal to Disallow Unilateral Downward Transfer Pricing Adjustments

Yesterday, the Dutch Ministry of Finance kicked-off an internet consultation on a draft proposal (the “Draft Bill”) to amend the Dutch codification of the arm’s length principle. The Draft Bill intends to disallow, as of 1 January 2022, downward transfer pricing adjustments to the taxable profit of Dutch group companies, to the extent that the corresponding upward adjustment is not included in the taxable base of the foreign counterparty to the transaction. Group companies operating in the Netherlands are recommended to review their existing advance pricing agreements and / or tax rulings as well as their transfer pricing policies to assess the impact of this proposed amendment of the arm’s length principle.

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