Branch report "Finding the meaning of nexus for taxes – past, present and future": The Netherlands

Traditionally the underlying principles for direct taxes in the Netherlands are residence and source (presence in the Netherlands (e.g. of the taxpayer, its employer or his assets or delivery of goods and services). Nationality is used in order to prevent tax avoidance. Deviations to the general principles for determining the taxable subject and taxable object also occur for efficiency reasons. Thus, both genuine and formal links are used in drafting tax law. In
determining the taxable income for income tax purposes both subjective and objective elements play a role. Over time judges gradually gave more relevance to the objective element. For some taxes contracts are the decisive factor.
The Netherlands lacks a Constitutional Court. The parliament has the task to perform the constitutional review. This implies that enforcement sometimes is given prevalence. The Supreme Court/ Dutch judges may and do test constitutionality on the basis of e.g., the legal principles of right to property and equality. The right to equality is entrenched in Art. 1 of the Dutch Constitution, Art. 17 of the Universal Declaration of Human Rights, art. 1 of the Protocol
No. 1 ECHR and Art. 1 of the Charter of Fundamental Rights of the European Union. The thinnest link with the Netherlands can be found in the Bank Tax levied on unsecured securities.
The unsecured securities of a foreign subsidiary of legal bodies established in the Netherlands in case the financial information of these subsidiaries is included in the consolidated annual accounts are included in the taxable object. The Lotus-case has been referred to only once by the Dutch Supreme Court in a tax case. The Nottebohm-case has not been referred to.
The Netherlands is supportive of Pillar One. The bill implementing Pillar 2 following closely the OECD guidance - which partly deviates from the EU Directive – is pending at the time of writing. Questions have been raised about the compatibility of the extraterritorial taxation under Pillar 2 with the existing Dutch tax treaty network and the 1 st Protocol to Art. 1 of the ECHR. Questions
have also been raised with regard to the legitimacy of the intervention in the economy of a sovereign non-participating state and the sanctioning of such a state morally. Authors further wonder how the extraterritorial top-up tax compares with the unofficial adage of BEPS Action Plans 8 to 10 that income is geographically taxed where its value is created. Some categorize these taxes as being not proportional and neo-colonial.