Ever since tackling base erosion and profit shifting (BEPS) started to gain attention at a global level, the Netherlands has been at the centre of the discussion because of its longstanding role in international tax planning. The objections raised by trading partners, international organisations and the media had a key issue in common: how the Netherlands facilitates structures resulting in income not being taxed anywhere in the world, to the detriment of countries where that income is earned and should be taxed. Now that the political and social pressure, as well as concrete action (EU state aid investigations), has been going on for more than five years, it is worthwhile to look back at the effects these developments have had on international tax policy in the Netherlands so far. And, more importantly, to see where we expect this process to go in 2019 and beyond.

From denial to acceptance and action Looking back, the Dutch government's attitude can be described as having gradually changed. At the beginning there was denial about how important a role the Netherlands played in international tax planning structures. Over the years, this attitude has shifted towards acceptance. This is demonstrated, amongst other things, by the Netherlands both supporting the BEPS project in general and making it a priority to be a front runner on transparency (while at the same time trying to maintain certain key elements of the Dutch tax system). In 2018, the focus changed from mere acceptance to action. For example, the Dutch government launched an official policy of no longer supporting, and in fact combatting, structures using the Netherlands as a flow-through for income that ends up being taxed nowhere. This latest phase started on 23 February 2018, when the Dutch State Secretary for Finance issued a letter announcing measures to combat tax avoidance and tax evasion. The letter contains a long list of measures that have since been implemented, such as the exchange of information on tax rulings and Country-by-Country reporting. But it also sets out a number of new measures that have not been implemented yet, such as the introduction of a withholding tax on interest and royalties paid to group companies in low-tax jurisdictions and tougher conditions for issuing APAs and ATRs. Even previously untouchable features of Dutch corporate taxation – such as the participation exemption and the infamous "informal capital" doctrine – are under scrutiny, since the Dutch State Secretary of Finance announced studies into how these features might be adapted to avoid contributing to aggressive tax planning. Where will it all end? If this trend continues at the same pace as demonstrated in the last few years, the Netherlands could soon be regarded as an inward-looking country surrounded by a high "tax and anti-abuse" wall that prevents foreign investors from taking advantage of the Dutch tax system. Fortunately, there are many reasons for believing that things will not go to that extreme. The most important reason is that the Dutch business community, in particular Dutch multinationals, need an economic environment that facilitates cross-border trade and investment. Any Dutch government, regardless of political colour, will want to ensure that our tax system serves that purpose. The reduction of the Dutch corporate income tax rates to 20.5% in 2021, and the recent expansion of the domestic dividend withholding tax exemption to 5% or more corporate shareholders in treaty countries, may serve as examples. Having said that, the measures announced in the 23 February 2018 letter will be implemented by the Dutch government expeditiously, starting in 2019. And those measures put an end to many traditional tax planning practices we have known in the Netherlands in the last few decades. Click here for a high-level summary of pending and announced measures that will dominate the discussion on Dutch international taxation in 2019.