Dutch Ministry of Finance provides welcome guidance for tax exempt entities such as pension funds in new policy decree 


In 2022, new transfer pricing anti-mismatch legislation entered into force, with a focus on neutralizing transfer pricing mismatches in corporate income taxation that arise due to the application of the at arm’s length principle. Such a transfer pricing mismatch arises for example when an entity acquires an asset from an affiliated entity for a price lower than fair market value, where the acquiring entity receives a step up and the transferring entity does not recognize a capital gain. With the anti-mismatch legislation, the Netherlands would in principle disallow the step-up in the Netherlands, thus leaving fewer room for depreciation in the tax base of the Dutch taxpayer. 

These rules also state that when an asset is acquired through a dividend, capital contribution, or similar transaction, the new book value will be equal to the amount taken into account for tax purposes of the affiliated transferring entity. Based on the literal wording of the article, this means that the new book value will be zero if an asset is acquired from a tax exempt affiliated entity. This situation qualifies as overkill as the absence of taxation at the level of the transferor is caused by the tax-exempt nature of the transferor and not by the mismatch in transfer pricing. 

The new policy decree published on January 24, 2023, addresses this overkill situation. In situations such as these where the asset is acquired from a tax exempt entity through a dividend, capital contribution or similar transaction, the step-up will nonetheless be granted to a Dutch transferee in case the following two conditions are satisfied: 

  1. The asset transfer by way of a (capital) contribution in kind is recorded at fair market value in the financial statements of both the tax exempt transferor as well as the Dutch transferee.
  2. For legal purposes, the transfer by way of a (capital) contribution in kind is also recognized at fair market value.  

The Decree applies to a dividend, repayment of paid-up capital, liquidation proceeds, capital contribution or similar transactions.


The overkill situation resulting in a step down instead of a step up of the acquired asset, is caused by the tax exempt nature of the affiliated transferor. The Ministry of Finance not only recognizes that there is overkill in this situation but also recognizes that it is not the purpose of the anti-transfer pricing mismatch rules to apply to this situation, as the mismatch is not caused by transfer pricing rules, but by the subjective exemption. In other words, the Dutch Ministry of Finance implicitly reiterates that the anti-mismatch legislation include an ‘origin requirement’, i.e. the mismatch should be caused by transfer pricing misalignment.

Though only a very specific case is covered by this policy, the policy decree may as such be seen as an additional argument that the anti-transfer pricing mismatch rules should only apply insofar the mismatch is a result of incompatible transfer pricing rules, even though the literal wording of the provision indicates a broader scope.  

The entry into force date of the Decree is set on the day after the formal publication in the official journal and has no formal retroactive effect or effective date. However, we feel that qualifying transfers prior to the such date should also be covered.