Tax Treaty Case Law around the Globe 2018

S. 387Chapter 32 Netherlands: Non-Discrimination Clause under Dutch/Israeli Tax Treaty and Dutch Group Taxation Regime

Daniël S. Smit

32.1. Introduction

The issue at stake in the case at hand basically constitutes an evergreen in the field of tax treaty law. The case concentrates on the Dutch group taxation rules (“fiscal unity”) as included in the Dutch Corporate Income Tax Act (CITA), and concerns differential tax treatment by the Netherlands of Dutch resident entities that are controlled by a foreign (Israeli) shareholder as against Dutch entities that are controlled by a Dutch shareholder under this regime. The question is whether such differential treatment is prohibited under the non-discrimination clause included in the Israel-Netherlands Income and Capital Tax Treaty (1973) (hereinafter Israel-Netherlands double tax convention, DTC).

The issue had already been raised for discussion in the early 1980s, by Van Raad, for instance, in his dissertation on non-discrimination. The OECD had also addressed this question explicitly before the events of the case at hand, first in the 1990s, in the context of the Declaration on International Investment and Multinational Enterprises, and more rec...