ATAD2 has been implemented in the Dutch legislation with effect from 1 January 2020. The ATAD2 provisions, which aim to neutralize certain tax effects of hybrid mismatches, include an annual documentation requirement. Although the ATAD2 is in force we notice that for taxpayers it appears a burden to comply with the documentation requirement.

The ATAD2 documentation requirements aims to enable the tax authorities review whether the ATAD2 hybrid mismatch rules have been correctly applied in the corporate income tax return of the taxpayer. As such, all taxpayers subject to corporate income tax should have documentation in place which substantiates whether or not a hybrid mismatch exists in their group.

Please note that this obligation also applies to entities which take the position that the hybrid mismatch rules do not apply to them. The legislation which provides for the documentation requirement does not provide details on how the information should exactly be documented.

However, the requirement comes down to gathering relevant information regarding financial instruments, (hybrid) entities and permanent establishments present within the group.

Tricky aspect is that the documentation must be available at the time of the corporate income tax return filing and needs to be annually updated. Upon request of DTA for the documentation supporting the ATAD2 position, the taxpayers will generally be given 6 weeks to gather the relevant information.

If the documentation is not made available within the given timeframe, DTA might have the burden of proof regarding the ATAD2 rules shifted to the taxpayer. Obviously, this is not preferable scenario.

Due to the complexity of ATAD2, the complexity of this process should not be underestimated.

We at Cervus Tax can assist your company in matter as these. Please contact our office!

Cervus Tax, October 2023

Jan Pieter van Eck
+31 (0)6 2616 4880
jpvaneck@cervustax.nl

D. Prinsen
+31 (0)6 2021 0645
dprinsen@cervustax.nl