Date: November 2025
Case reference: ECLI:NL:GHAMS:2025:2377 (Amsterdam Court of Appeal, 11 September 2025)
1. Background
The case concerns a Dutch company belonging to a global tobacco group, covering the years 2008 to 2016. The Dutch Tax Administration challenged the company’s transfer pricing policies for several cross-border transactions within the group. These included fees paid for factoring services provided by a Belgian group entity, guarantee fees paid on bonds issued by the Dutch entity and guaranteed by another group company, and the termination and relocation of licensing and commercial rights from the Netherlands to the United Kingdom (referred to as the ‘Exit’). The resulting tax adjustments and penalties were substantial, amounting to over one billion euros in total.
2. Transfer pricing methods applied by the company
1. Factoring services – The Dutch company paid a turnover-based fee to the Belgian group entity. The fee combined a charge for taking over the risk of non-payment on trade receivables and an administrative fee for managing those receivables.
2. Group guarantees – When issuing bonds, the Dutch entity paid a guarantee fee to another group company that provided a formal guarantee. The company determined the fee by calculating the difference in interest rate between a bond with a group guarantee and a hypothetical stand-alone bond without such support.
3. Relocation of rights (Exit) – The Dutch entity ended certain licensing and distribution activities and transferred these functions and related rights to a UK group company. The Dutch company did not record any compensation for the value of the transferred rights and business potential.
3. Why the Dutch Tax Administration disagreed
The Tax Administration argued that the company’s transfer pricing did not reflect arm’s-length behaviour — in other words, it did not match what independent parties would have agreed under comparable circumstances.
Factoring: A turnover-based fee was not realistic. Independent factoring companies would charge a fee based on actual risk exposure (the amount of receivables) and actual administrative costs, not a fixed percentage of sales.
Guarantee fees: The company failed to consider implicit support from being part of a strong multinational group. A lender would already view the Dutch entity as more creditworthy due to its group membership. Therefore, paying an additional guarantee fee overstated the cost of financing.
Exit to the UK: By transferring valuable rights and activities to the UK without any compensation, the company effectively shifted business value abroad without payment. The Tax Administration treated this as a non-arm’s-length transfer and imposed an exit charge in the Netherlands.
4. Decision of the Court of Appeal
The Amsterdam Court of Appeal largely agreed with the Dutch Tax Administration, although it differentiated between the issues.
Factoring – The Court ruled that using turnover as a pricing base was inappropriate. The credit risk component should relate to the actual value of the receivables, while the administrative fee should reflect real operating costs plus a modest mark-up. Because the company should have known its method was not market-based, the Court upheld the tax penalty on this issue.
Guarantee fees – The Court concluded that the Dutch entity’s group affiliation already provided a level of financial support, known as implicit support. As lenders would assume that the parent company would stand behind its subsidiary, a separate guarantee fee did not reflect an arm’s-length outcome. The Court therefore disallowed the deduction of the guarantee fees but cancelled the penalty, acknowledging that the matter involved complex interpretation.
Relocation of rights (Exit) – The Court confirmed that ending the Dutch licences and transferring them to the UK without payment was not something independent parties would do. The Dutch entity should have received compensation for the value of the rights and future profits transferred. The Court upheld a tax adjustment of approximately €1.3 billion but cancelled the €106 million penalty, as the company had been transparent during discussions with the tax authorities.
Burden of proof – The Court reaffirmed that in cases where a taxpayer’s transfer pricing is clearly incorrect, the burden of proof can shift to the taxpayer. This means the company must demonstrate, beyond reasonable doubt, that its reported figures are accurate. The Court explicitly noted that this rule also applies to transfer pricing disputes.
5. Key lessons and implications
This ruling reinforces several important principles for multinational companies with Dutch operations:
a. Implicit support matters – When a company belongs to a financially strong group, its credit rating is often higher than that of an independent company. This implicit support must be reflected in transfer pricing analyses for financing and guarantees. In many cases, it eliminates the need for a separate guarantee fee unless a measurable, additional benefit can be proven.
b. Financial service fees should be cost-based – Turnover-based fees for services such as factoring or cash-pool management are high-risk from a tax perspective. Companies should ensure that fees are based on actual costs and exposure to risk, supported by clear benchmarking or internal data.
c. Restructurings and relocations create taxable value – Transferring functions, rights, or assets between countries can trigger taxable income if value is created or shifted. Companies must identify and document the market value of the transferred items and the compensation received.
d. Documentation and transparency are critical – Transfer pricing files should clearly explain how methods are chosen, how credit ratings are determined, and how implicit support is considered. Open dialogue with the tax authorities can significantly reduce penalty risks, even when adjustments occur.
6. Recommended actions for companies
1. Review existing guarantee and factoring agreements to ensure they reflect how independent companies would price similar services.
2. Update transfer pricing documentation to include explicit analysis of implicit support, credit rating assumptions, and cost structures.
3. Evaluate any past or planned restructurings involving movement of rights or functions between entities, and ensure proper valuation and compensation.
4. Enhance governance and record-keeping to avoid burden-of-proof reversals in future audits.
5. Engage proactively with tax authorities when complex interpretations arise to reduce penalty exposure.
In summary
The Court’s ruling sends a clear signal: Transfer pricing arrangements must reflect how independent parties behave in real markets. Group comfort cannot justify charging guarantee fees, turnover cannot replace a cost-based approach, and moving valuable rights without compensation will trigger taxation. Companies should revisit their financing, service, and restructuring policies to ensure alignment with both the OECD Transfer Pricing Guidelines and this latest Dutch case law.
In close cooperation with local partners, Fisconti can assist you with this impact analysis and further implementation. For more information, please contact Guido van Asperen (+31 70 219 5093 or guido.van.asperen@fisconti.nl).
