Update to Dutch fiscal unity decree
The Dutch Secretary of Finance issued an update to the fiscal unity decree. In this article, Intaxify summarizes the key changes and practical impact.
Control requirement vs. limitations of control in share purchase agreement
One of the conditions for a fiscal unity is that the parent company has at least 95% ownership (including control) of the subsidiaries included in the fiscal unity. When a subsidiary is to be sold, the formal legal transfer is sometimes conditional to certain approvals of regulatory authorities. In practice, the buyer will then often stipulate that the seller needs approval from the buyer to engage in certain transactions (such as dividend distributions, hiring new directors, etc.).
This limitation may formally mean that the parent company does not have at least 95% control of the subsidiary anymore. The fiscal unity would then terminate with respect to the subsidiary to be sold, once the share purchase agreement is signed. On the other hand, the buyer does not have the legal ownership of the shares yet (also required to form a fiscal unity), so the subsidiary cannot be included in a new fiscal unity with the buyer either.
Under the new decree, automatic termination of the fiscal unity can be avoided. The aim of the new measure is to prevent that the subsidiary becomes a separate taxpayer between the moment the agreement is signed and the moment that formal legal transfer takes place (i.e. the moment as per when the subsidiary can be included in a new fiscal unity with the buyer).
Requirements:
- Taxpayers submit a request to the Dutch tax office within two weeks after signing the share purchase agreement;
- The sole purpose of limiting the seller’s control is related to preventing a reduction of the value of the shares between signing the agreement and the formal legal transfer of the shares;
- The formal legal transfer takes place shortly after the signing of the agreement. A period of three months is in general allowed. In certain specific situations where the formal legal transfer cannot take place within three months, taxpayers can discuss this with the tax authorities.
Non-businesslike loans and article 15ab, paragraph 6 Dutch CIT Act
In case a debtor wants to form a fiscal unity with its creditor, the value of its debt should correspond with the value of the receivable accounted for by the creditor. This means that if the creditor wrote down (part of) its receivable, the debtor has to consider a corresponding profit. However, in case of a non-businesslike loan, the creditor is not allowed to consider the write down for tax purposes.
The new decree now allows that the debtor does not have to account for the profit in case the creditor was not able to take a corresponding tax deduction.
Loss allocation to subsidiary in subsequent fiscal unities
The current loss allocation rules restrict the allocation of losses to subsidiaries leaving the fiscal unity. If entities forming a fiscal unity (the “old” fiscal unity) are included in another fiscal unity (the “new” fiscal unity), it is in principle not possible to allocate losses originated from the old fiscal unity to a subsidiary that was part of the old fiscal unity. That is because technically speaking, these losses are classified as pre-fiscal unity losses of the parent company of the old fiscal unity, rather than losses of such subsidiary.
The new decree now allows the allocation of these “old” losses to a subsidiary that was part of the old fiscal unity when this subsidiary subsequently also leaves the new fiscal unity.
Requirement:
- A request should be submitted to the Dutch tax office on behalf of the old parent company, the subsidiary leaving the fiscal unity and the parent company of the “new” fiscal unity.
Source:
https://zoek.officielebekendmakingen.nl/stcrt-2018-49422.html