How the Netherlands participates in international tax data exchange

A single standard for the international automatic exchange of tax and financial information (CRS) was developed by the Organization for Economic Cooperation and Development in 2014 on behalf of the finance ministers of the G20 countries. Directive 2014/107/EU of December 9, 2014 fixed the standard for the countries of the European Union. At the same time, each EU state has the right to interpret and implement the CRS in its own way, without deviating from the general rules set out in the Directive.

Let's see how the CRS requirements are implemented in the Netherlands.

What's the point?

According to CRS, financial and tax data of legal entities and individuals who are required to pay taxes abroad are subject to exchange.

Following the CRS, banks and other financial institutions provide the Dutch tax authorities with information about the accounts of their foreign clients - individuals and companies. In particular, this applies to:

• closed companies with limited liability - Besloten Vennootschap (BV);
• public limited companies - Naamloze Vennootschap (NV);
• partnerships with unlimited liability - Vennootschap Onder Firma (VOF).

We are talking about companies with non-resident founders registered in the Netherlands and legal entities established abroad. Sometimes this also applies to data from the ultimate beneficiaries of companies.

The CRS obliges financial institutions to determine the tax residency or place of residence of their customers. The account holder must submit an appropriate report. If the client's country of tax residency or residence is a country that participates in the CRS, the financial institution provides the data to the Dutch tax authorities for further exchange.

Conversely, the Dutch tax office receives information about the foreign financial accounts of Dutch citizens and companies with Dutch registration or Dutch tax residence. This does not automatically mean that the tax will have to be paid in the Netherlands. First, the data for each specific subject is analyzed.

Adoption of CRS

Today more than 100 countries of the world have joined the CRS. Along with this, the Netherlands was among the "pioneer" countries in the implementation of the exchange of tax information. Directive 2014/107/EU and CRS were implemented in Dutch law on 1 January 2016 with the Law on Mutual International Tax Assistance. As a result, financial institutions were required to report on CRS from 2017 (based on data for the 2016 tax year).

Who should provide data?

Financial institutions must provide information to the Dutch tax authorities. By "financial institutions" the IRS means:

1. banks;
2. brokers;
3. investment organizations;
4. some types of insurance companies.

If you are not sure whether you are required to submit data under CRS to the tax office, consult a Nalog.nl specialist.

How is the country of tax residence determined?

Each individual and legal entity has a country of tax residence. Financial institutions are required to determine which countries their customers are residents of. From January 1, 2016, special forms are used for this purpose:

• "Determination of tax residency" - for individuals;
• "Determination of tax status" - for companies.

The forms were developed by the Ministry of Finance and the Dutch Banking Association and are now used by almost all financial institutions in the Netherlands.

What information is used to determine tax residency?

Each country participating in the CRS uses its own rules to determine the country of tax residence of individuals and legal entities. Information about this can be found on the website of the Organization for Economic Cooperation and Development (OECD).

Let us consider what circumstances are taken into account when determining the tax residency of a person by the regulatory authorities in the Netherlands.

An individual is considered a tax resident of the Netherlands if he legally resides in the country permanently or for an extended period of time. It checks the following conditions:

• You spend most of your time at your residential address in the Netherlands.
• Your partner and your family live in the Netherlands.
• You work in the Netherlands.
• You are insured in the Netherlands.
• You have a family doctor in the Netherlands.
• You are a member of one or more Dutch associations.
• Your children are being educated in the Netherlands.

When determining the tax residency of a company, factors such as:

• the place where the organization is established (registered);
• the place where key management decisions are made;
• the place where board members meet;
• the place where the office is located and reporting is done;
• the place where shareholders live and gather.

The organizational and legal form of business also plays a role. For example, if this is a partnership with unlimited liability, then the tax residency of the partners is taken into account.

If you are faced with a situation where it is difficult to determine the tax residency of a company, dotting the “and” will help Nalog.nl consultant - contact!

What information is sent to the tax office?

If a financial institution determines the foreign tax residence of the client, then the following are transferred to the tax service:

1. Personal Information (full name / company name, address, date and place of birth / registration, country of tax residence, tax number of the person);
2. financial data (account or insurance policy number, balance sheet or policy value, percentage income, proceeds from the sale of financial products such as securities).

What happens to the data?

Data is transferred annually to countries participating in the exchange of tax information. There they are analyzed and verified. In turn, the Netherlands also receives information from the countries participating in the CRS. Personal data is protected. The Organization for Economic Co-operation and Development (OECD) plays an important role in this regard.