As of 1 January 2014, financial service entities must report in their annual corporate income tax returns whether or not they meet the new substance requirements. A financial service entity is defined as a Dutch resident entity whose main activities consist of receiving (or paying) interest, royalties or rent from (or to) foreign entities that belong to the same group as the Dutch entity. Whether or not these activities qualify as the main activities of an entity is determined on the basis of the facts and circumstances such as the assets, the other activities and the work done by the employees. Note that all activities concerning the holding of participations are not considered financial service activities.
Financial service entities must submit information on the expertise of the directors, the factual place of management, the location where the bookkeeping is done and where the bank accounts are held, amongst other things. If these substance criteria are not met, the Dutch entity must disclose whether or not it invoked a treaty provision on the avoidance of double taxation in relation to the Netherlands, the European Union interest and royalties directive or a national provision that was created to implement the directive.
Failure to disclose the required information may result in a penalty of up to EUR 19,500. If one of the aforementioned provisions was invoked and a financial service entity does not meet the substance requirements, the Dutch tax authorities will spontaneously provide all the relevant information about the Dutch entity, their activities and their income included, to the relevant foreign tax authorities.