Audit Magazine Summer 2005

The influence of the Dutch group financing rules in the corporation tax act on intellectual property tax planning via the Dutch Antilles The from a tax viewpoint desirable transfer of potentially highly profitable business activities, for instance the exploitation of a group’s intellectual property rights (hereinafter: IPR), by Dutch multinationals to low taxed Dutch Antilles subsidiaries, has for a long time been viewed as problematic. After all, a Supreme Court case in 1987 held that an Antilles subsidiary (reinsurance company) of a major Dutch shipping group, was taxable for corporation tax in the Netherlands for the bulk of its profits, despite the fact that the entity had several local employees in the Antilles. The Antilles entity was deemed to operate a permanent establishment in the Netherlands at the location of the group’s head office (‘’place of management’’). However, in 2003, the Tax Court of Amsterdam has seen several new cases concerning the Antilles route and has shown in its verdicts that better planning at the end of the taxpayer may greatly influence the outcome. The Court held amongst other things that in case the activities undertaken by the Antilles entity are relatively restricted by their nature, and if the management of the Antilles entity has sufficient knowledge and expertise to perform its management tasks without undue support from the Dutch group head office, no taxation of an Antilles entity in the Netherlands may take ...