The Dutch Ministry of Finance has announced the launch of a public consultation on a draft bill to address transfer pricing mismatches arising through different applications of the arm's length principle in different countries. In particular, a new Article 8ba would be added to the Corporate Income Tax Act 1969 that would disallow downward adjustments if the Dutch taxpayer cannot establish that a corresponding upward adjustment was included in the foreign related party's tax base by the other country.

In addition, Article 8ba provides that no step-up in basis (up to the arm’s length value) will be provided for assets that are acquired by a Dutch taxpayer from a related party in another country at a value below the at arm’s length value to the extent that no corresponding adjustment for the arm’s length value is taken into account in the related party's tax base. In relation to this, the draft bill also provides for the addition of a new Article 35 that includes provisions to limit the depreciation of assets acquired from related parties in the five financial years preceding the financial year commencing on or after 1 January 2022 if the rule of Article 8ba regarding acquired assets would apply, had it been in force at the time.

In addition to the consultation on the draft bill to address transfer pricing mismatches, the Ministry is also consulting on a draft bill to implement the reverse hybrid mismatch rules of the EU Anti-Tax Avoidance Directive as amended (ATAD2), which will take effect from 2022 as required by ATAD. The other ATAD hybrid mismatch rules have already been implemented with effect from 1 January 2020. Further, a separate consultation will be launched in the coming weeks for adjustments to the qualification policy of (foreign) legal forms to prevent hybrid mismatches from occurring.

For the two consultations that have been launched, the consultation periods run from 4 March 2021 to 2 April 2021.