Preventing tax evasion abroad by businesses
To tackle tax evasion and undeclared savings, the Dutch Tax and Customs Administration (Belastingdienst) is going to exchange information automatically with more and more countries. It obtains this information from financial institutions.
The information concerns individuals or businesses that may be required to pay tax abroad. The countries in question subsequently investigate whether tax actually has to be paid. This may have consequences for your business.
Exchanging information with the US
Dutch financial institutions have been investigating their clients’ details since 1 July 2014. In accordance with the FATCA-decree, they started supplying information to the Dutch tax authorities since 1 January 2015.
The Dutch tax authorities will start supplying information to the US tax authorities (IRS) by the end of September 2015. This will include information from 2014, but not from previous years. Conversely, the IRS will supply information to the Dutch tax authorities.
Financial information will be exchanged on the basis of the Foreign Account Tax Compliance Act (FATCA) and the FATCA agreement between the Netherlands and the United States. The exchange of information will not begin until both houses of the Dutch parliament have given their approval. A bill has been submitted to that end.
FATCA means simpler process and better legal protection
The FATCA agreement will make it easier for Dutch financial institutions to exchange information. They will no longer have to conclude agreements with the IRS separately. And in principle they will no longer face the risk of paying 30% withholding tax US income from the US.
The agreement also improves the position of financial institutions’ clients. This is because the institutions will no longer supply information directly to the IRS. This will be arranged through the Dutch Tax and Customs Administration. Both the Tax and Customs Administration and the IRS maintain high standards of data protection.
Global information exchange
The Netherlands is also going to exchange financial information worldwide in accordance with the Common Reporting Standard (CRS). This means the Dutch tax authorities will share information from financial institutions with tax authorities in other countries that have adopted the CRS. This information relates to account holders who have a bank account in a country that is not their country of residence for tax purposes.
The Senate and the House of Representative have passed the CRS bill. It became law on 1 January 2016. This means financial institutions now have to know the tax residence of all their customers. If an account holder is based in a country that is has adopted the CRS, the financial institution must share information about their account with the Tax and Customs Administration. The first information exchange with the Netherlands will take place in 2017 and will concern information from 2016. Information from previous years will not be exchanged.
Ninety-five countries have currently committed to automatically exchanging information about bank accounts under the CRS. Before information can actually be exchanged between countries (except EU member states), more detailed agreements must be made. For example on the protection of personal data.
In September 2018, many more countries will start using the CRS. The Netherlands will then automatically exchange information with these countries as well.
Financial data supplied by the Dutch tax authorities
The financial information that the Tax and Customs Administration will share with foreign tax authorities includes:
- income from dividends and interest;
- bank account balances;
- insurance contract values;
- proceeds from the sale of financial products.
Not automatically a tax assessment
The exchange of information on a particular business or private individual does not necessarily mean that they will have to pay tax abroad. The foreign tax authorities must first evaluate the information. The Dutch tax authorities are not involved in the tax assessments or payment requests of foreign tax authorities, and vice versa. If the Dutch tax authorities receive information about you from abroad, they will evaluate it before deciding whether to issue a tax assessment.