Revenue to hand over €1m to Dutch tax authorities to settle KPN dispute

The Revenue Commissioners has agreed to hand over about €1 million to Dutch tax authorities as part of the settlement of a dispute concerning where the tax on profits generated by the Irish-based insurance division of Dutch telecoms giant, KPN, should be paid.

The double taxation dispute, which is mentioned in KPN's latest annual report, arose after Dutch tax authorities queried the taxes paid by the company in the Netherlands regarding KPN Insurance Company, a Dublin unit that handles insurance for KPN customers' mobile phone handsets.

Dutch tax authorities raised issues over the taxation of the company's activities in 2014 and 2015, when KPN Insurance Company earned about €12.5 million in profits. It paid more than €1.5 million in taxes in Ireland those years, even though the company wrote no business in the Republic.

KPN would have had to pay even higher taxes if that insurance income had been taxed in the Netherlands. After the dispute arose, Revenue and its Dutch counterpart entered formal mutual agreement procedure (Map) talks to resolve where the insurance company’s taxes should have been levied.

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The €1 million settlement, first reported by Dutch newspaper De Telegraaf, only applies to 2014 and 2015. KPN suggested in its annual report that there may be further disputes and Map talks over KPN Insurance Company’s taxes since 2016, when it says it changed the nature of its activities.

The Dutch company said it is “confident that this procedure will be settled in favour of KPN”.

When asked to comment, Revenue said it is legally unable to comment on the affairs of an individual taxpayer. De Telegraaf had originally suggested that the €1 million was handed over because the tax had been improperly levied in Ireland. Revenue said that this description is inaccurate and said Map talks arise simply to “rebalance” a multinational’s situation and avoid double taxation.

KPN told The Irish Times that what happened in 2014 and 2015 “is not a precedent” and suggested a fresh dispute is inevitable over its taxes for other years if “both countries claim full taxing rights” for KPN Insurance Company.