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Tax Avoidance: Netherlands

Question for Treasury

UIN 149161, tabled on 4 February 2021

To ask the Chancellor of the Exchequer, what steps his Department is taking to prevent companies funnelling profits into low tax subsidiaries in the Netherlands.

Answered on

12 February 2021

The UK has led international efforts to tackle avoidance by multinationals, including through the OECD Base Erosion and Profit Shifting (“BEPS”) Project which looks at aggressive tax planning strategies that exploit tax rules to artificially shift profits to low tax jurisdictions where there is little or no economic activity.

This international collaboration has led to the introduction of hybrid mismatch rules that prevent multinationals exploiting differences in the tax systems of different countries, a requirement for UK headed large businesses to provide HMRC with a country-by-country report, detailing their global profits, tax and assets to ensure they are paying the correct tax on all their UK activity, and a Corporate Interest Restriction that protects against companies using intra-group loans to shift profits overseas.

Alongside these multilateral efforts are UK domestic rules that have complemented these changes.

In April 2015, the UK Government introduced the Diverted Profits Tax (‘DPT’). DPT was designed to counter contrived arrangements used by multinational corporations to shift their profits offshore and avoid paying tax in the UK on their economic activities here.

In January 2019 HMRC launched a new Profit Diversion Compliance Facility (‘PDCF’) to encourage businesses to stop diverting profits and pay what is due. About two-thirds of the large businesses targeted so far have decided to use the facility to bring their tax affairs up to date quickly and efficiently, enabling HMRC to focus even more resources on investigating businesses which continue to divert profits.

Multinationals can often have complicated tax affairs and HMRC are determined to ensure that their profits are correctly attributed, and they are paying all the tax they owe.

Additional information about HMRC’s work to tackle profit diversion by multinational companies is available on GOV.UK along with the most recent Transfer Pricing and Diverted Profits Tax statistics:

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