Two ECJ rulings of 26 February 2019 cast doubt on whether safe harbour rules applied by the Netherlands are compliant with EU law. 

Under these safe harbour rules, an abuse of EU law is deemed not to exist, and consequently benefits under the Interest and Royalty Directive and the Parent-Subsidiary Directive are granted, if certain specific requirements are fulfilled, such as having at least 50 percent local resident directors, conducting board meetings locally, having a minimum of EUR 100,000 of salary expenses and having office space available under a lease of at least 24 months. Many investors, including private equity funds, rely on these safe harbour rules to repatriate earnings from the Netherlands through Luxembourg or other jurisdictions to non-EU investors without incurring Dutch tax. 

In its rulings, however, the ECJ has held that EU member states are obliged to deny the application of exemptions from tax under the directives to a recipient of income that is a 'conduit company'. According to the ECJ, a conduit company cannot be considered the beneficial owner of income and, therefore, claiming benefits under the directives constitutes an abuse of EU law. 

The ECJ did not define the term conduit company but it gave a non-exclusive number of indications (for example the fact that the recipient of the income immediately passes the income on to a person not entitled to benefits under the directives) for the national courts of the member states to consider when determining whether a company acts as a conduit company. Because, according to the ECJ,  the determination whether a conduit company exists must be made on a case by case basis, the feasibility of safe harbours within which an abuse of EU law (and thus a conduit company) is deemed not to exist must be questioned. 

In addition, the particular safe harbour rules applied by the Netherlands might be satisfied by recipients which the ECJ considers to be a conduit company. If the application of the Dutch safe harbor rules would result in the Netherlands granting an exemption from Dutch tax to conduit companies under the directives, this would be in conflict with EU law, because the ECJ has clearly held that member states are obliged to deny these benefits if an abuse of EU law exists. 

In response to questions raised in parliament, the Dutch Deputy Secretary of Finance has said that the Dutch Ministry of Finance is studying the ECJ rulings. Depending on the outcome of this reflection, non-EU investors may in the future no longer be able to rely on the Dutch safe harbour rules to repatriate earnings from the Netherlands without incurring Dutch tax.