Transfer Pricing in the Netherlands

We are a small privately owned US based manufacturing company with a wholly owned subsidiary in The Netherlands. For  many years (13) we (the US parent and the Dutch subsidiary) have had a Transfer Pricing Agreement approved by the Dutch Tax Authority covering grant of an exclusive territory, technology, trademarks, patents, know-how, and management services. The fee was a percent of subsidiary revenues. The agreement has now expired and we are facing the renewal process. We are told the rules have changed and the process is very quantitative and research intensive. The question is for any readers which have similar circumstances and have recently completed the Application for Pricing Agreement (APA) process with the Dutch Tax Authority -

• Any advice on how to proceed,

• What fees (% of revenues) are considered to be reasonable,

• How are these fees determined,

• Should we use advisors,

• Any recommendations on advisors to use,

• What can we expect in terms of interactions with Dutch Tax Authority, elapsed time and cost?

All responses appreciated.

Timothy Giegel (Tim.Giegel@Askoinc.com)

Response:

I shared your questions with a close friend of mine who is the VP of Taxes of a $1+ billion revenue international public company.  Transfer pricing is a very complex topic with countries revising their laws to generate more tax revenues.  Therefore, I highly recommend that you retain either a transfer pricing expert from a Big 4 accounting firm or from a major law firm that has offices in the Netherlands.  Baker & McKenzie (www.bakernet.com) has one of the largest networks of law offices in the world. I noted that they have an Amsterdam office. However, it might be equally effective for you to deal with one of their U.S. offices—either Chicago or Washington, D.C. as they do not have a Pittsburgh area office where your company is headquartered.

Jerry Sweas (jerry.sweas@comcast.net)