With the introduction of ATAD 2, a documentation requirement has been incorporated into the law. This documentation requirement has implications for companies with associated parties abroad.
ATAD 2 and Documentation Requirements
ATAD 2 is a European anti-tax avoidance directive designed to combat the use of hybrid mismatches. A hybrid mismatch occurs when a tax advantage is gained by exploiting differences between tax systems in various countries.
Under the statutory documentation requirement, you must state in your corporation tax returns whether or not ATAD 2 applies to your business. You can read below about the implications of this documentation requirement for your business.
Action required?
If your company has affiliated parties abroad, action is required. An ‘affiliated party’ refers to an entity in which your company holds, directly or indirectly, a stake of at least 25%. Examples include parent companies or subsidiaries based abroad.
In this case, standard record-keeping is insufficient to meet the statutory documentation requirement. In such cases, additional documentation must be included in the records to show whether and to what extent the rules of ATAD 2 apply within your organisation. This could include the following documentation:
- a group structure chart;
- foreign tax returns and tax assessments;
- Articles of Association of Recipients
- relevant agreements;
- a statement explaining why the ATAD 2 rules do not apply OR a statement explaining to what extent the ATAD 2 rules do apply and how this has been applied in the relevant tax returns.
No action required
If your company has no related parties abroad, the standard accounting records are sufficient. If your company operates solely in the Netherlands, it will be clear from the standard accounting records that there are no international payments or receipts and that there are no related parties established abroad. If your company does carry out transactions abroad, such as the purchase of goods, standard accounting records are sufficient provided they show that the transactions abroad are with non-affiliated parties.
If you have any questions about the documentation requirement, or if the documentation requirement applies to your business, we would be happy to work with you to determine what documentation you need to keep in order to comply with the statutory documentation requirement.