M&A and Dutch tax: acquisition of shares by a Dutch company

General interest deduction

Dutch tax law has a general interest deduction limitation. As a consequence, when the interest exceeds EUR 1 million or, if higher, 30% of the profit defined according this provision, the excess part of the interest is non-deductible.

Financing the acquisition by a group loan

There is a specific provision for the acquisition of shares financed by a group loan. When the acquisition is financed by a group loan and there is no back-to-back external loan, under certain circumstances the interest on the group loan is non-deductible.

Loss relief

If the Target is a Dutch tax resident with compensable losses, the main rule is that THE Target can offset these losses with its taxable profits from the previous year as well as from the six years following the loss year. For the sake of completeness, please note that the Dutch government announced changes in its loss relief legislation (we will not elaborate on this in this article).

However, if the Target has compensable losses and there is a change of (indirect) ownership of the Target exceeding 33.33%, for loss compensation there are additional requirements that apply regarding the extent of the activities in the acquisition year compared to the activities in the loss year.

Participation exemption

When the Dutch company’s interest in the Target exceeds 5%, the Target’s profits are, in principle, exempt from Dutch tax. In addition to the tax exemption on the Target’s profits, the costs of acquiring (and selling) Target are tax exempt and therefore non-deductible. Examples of these costs include costs for notarial deeds, advisory services relating the acquisition, etc.

As already indicated, please note that this list is non-exhaustive and the provisions described are generic.

Depending on the case, there are more relevant tax-related topics. Therefore, we advise you to consult a Dutch tax advisor in this matter.

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Photo: Mayk van Houtert - stock.adobe.com