Double Tax Treaty Romania The Netherlands

1
Double Tax Treaty Romania The Netherlands

• René G.M. Landgraf
• Cluj, 28 october 2004

2

• Our new Constitution is now established,and has
  an appearance that promises permanency but in
  this world nothing can be said to be certain,
• except death and taxes.
• B.Franklin
• From a letter to Jean-Baptiste le Roy
• Philadelphia,
  november 13, 1789

3
Three things are certain in life

• death
• taxes and
• mankind's unrelenting
• effort to evade both.

RTA
(Keppler/Nagin 1989)
4
International Tax Avoidance and Evasion

• Tax evasion
• illegal or fraudulent abuse of tax laws by
  concealment or misrepresentation
• Tax avoidance
• deliberately arranging transactions and
  relationships to obtain benefits unintended by
  domestic laws or treaties
• Tax planning
• arranging international transactions and
  relationships to take advantage of benefits
  permitted under domestic laws and bilateral
  treaties

5
Common Themes

• different tax rates
• different tax base definition
• different income / deduction definitions
• different source / attribution rules
• different characterisation def. (different kind
  of income)
• different timing rules (realisation v. earning)
• different treatment of entities
• recognition v. non-recognition

6
Administrative Responses

• Establish and maintain an effective tax
  administration structure
• encourage voluntary compliance
• resources, collection/audit strategies
• documentation and information requirements
• dispute resolution process
• International Co-operation
• Effective Exchange of Information
• Mutual Agreement procedures

7
Legislative Responses to Avoidance

• Transfer Pricing legislation
• Arms length principle
• Thin Capitalisation legislation
• Treaty provisions

8
Goal of Dutch Tax and Customs Administration

• To support taxpayers in complying with, levying
  and collecting taxes
• and to monitor their compliance by applying
  various forms of client treatment.

9
Mass media communication, the slogan
Leuker kunnen we het niet maken, maar wel
makkelijker We cant make it more pleasant, but
we can make it easier.
mr. J.N. van Lunteren
10
Double Tax Treaty (DTT)Romania the Netherlands

• Scope
• DTT allocates taxing rights and reduces tax rates
• To prevent double taxation
• Prevalence over domestic
• DTT provisions override domestic legislation if
  more favourable, recognised by the Fiscal Code
• Applicability
• yearly fiscal residency certificate to apply the
  DTT
• Elimination of double taxation
• for the tax paid in Romania (if in line with the
  DTT)

11
DTT Romania-The Netherlands

• Who can apply the DTT?
• natural persons or legal entities
• residents of Romania or The Netherlands tax
  residence certificate
• Residency criteria
• domicile
• residence
• place of management or
• any other of a similar nature

12
DTT Romania-The Netherlands

• Permanent Establishment (PE)
• Definition
• 12 months test - construction site
• Business Profits profits of an enterprise are
  taxable in residency state unless activity is
  developed through a permanent establishment.
• Assess profits attributable to a PE
• DTT reasonable allocation
• Fiscal Code - limited deductibility for
  head-office charges reg admin, management, RD,
  etc.
• Practice of tax authorities

13
DTT Romania-The Netherlands

• Income from immovable property
• rent, exploitation, use
• taxable in the state where the property is
  situated 25 in Romania
• Capital gains
• sale of immovables taxable in the state where
  the property is situated - 25 in Romania
• sale of ships, aircrafts taxable at place of
  effective management
• sale of shares - taxable in the residence state
  nil WHT in Romania
• International transportation
• taxable at place of effective management nil
  WHT in Romania

14
DTT Romania-The Netherlands

• Dividends
• Beneficial owner
• Fiscal code DTT
• Non-resident
• Company 15 0,5,15
• Individual 15
• Romanian
• Company 10
• Individual 5

15
DTT Romania -The Netherlands

• Interest
• Interest on term deposits, certificates of
  deposits etc from banks and authorized credit
  institutions
• Other interest
• Royalties
• Royalties versus services
• Know-how transfer - New definition in Fiscal Code
• Software - norms according to OECD Model
• Transfer all rights no royalties
• Transfer partial of rights - for personal use
  no royalties - for commercial exploitation -
  royalties

16
DTT Romania -The Netherlands

• Independent services taxable in residency state
  if not provided through a fixed base
• Employment income taxable in residency State
  unless the employment is exercised in the other
  Contracting State
• Conditions
• Residence
• Employed locally
• 183 days rule (183 days in any twelve month
  period beginning or ending in the fiscal year
  concerned)

17
Double Tax Treaty Romania The Netherlands

• René G.M. Landgraf
• Cluj, 28 october 2004