The Netherlands said it will tighten rules on tax breaks for foreign firms after facing criticism from the EU for offering complicated schemes for multinationals. Dutch authorities said they were cracking down on "letter box firms" with a Dutch address which allow foreign countries to benefit from lucrative local deals.
"We are making considerable changes to the law in order to prevent the Netherlands from being used as a conduit to tax havens," Deputy Finance Minister Menno Snel said in a letter to parliament seen on Tuesday. "These changes also mean that letter-box companies established in the Netherlands purely for fiscal reasons, but which do not contribute anything to the Dutch economy, will in future not get any dispensation from the tax authorities," Snel's ministry added in a statement.
The announcement follows a Dutch probe opened in November last year in the wake of revelations by the so-called "Paradise Papers" scandal. Leaked documents claimed that several multinationals saved millions in taxes through secret tax deals and loopholes in the Dutch system. But there has also been mounting pressure from the Netherlands' EU partners.
In January a top European Union official described several European countries including the Netherlands as being "black holes" for tax and promised to pressure them to change their ways. Pierre Moscovici lumped the Dutch in with Ireland, Luxembourg, Malta and Cyprus as countries that often serve as EU headquarters for global multinationals such as Google, Apple or Facebook, offering complex tax schemes to help them shift profits and avoid big bills. The European Commission is currently investigating Swedish furniture giant Ikea's tax deals in the Netherlands, while in a similar Dutch case it ordered coffee chain Starbucks to repay 30 million euros in back taxes.
Dutch authorities said the new rule comes into effect next year and aimed to tighten tax agreements between companies and the authorities. "From now on, there will be a much sharper eye on the application for the tax ruling. If the motive is purely to avoid Dutch or foreign tax, no ruling will be given," the Finance Ministry statement said. Snel added: "A lot of people think that awarding tax rulings involves shady deals. We are now tightening the rules on how we hand down rulings and making it transparent to everybody."