On 17 November, the Second Chamber of Dutch Parliament adopted the 2012 Tax Bill. The Tax Bill contains the following elements that are of particular relevance to foreign investors and other parties involved in M&A and other investments activities in the Netherlands:
- The deductibility of interest on acquisition debt, including debt owed to third parties, attracted to acquire a Dutch target company that will be included in a consolidated tax group (fiscal unity) with a Dutch holding company without any taxable activities, will be restricted if and to the extent:
(i) the acquisition-debt-to-purchase-price ratio exceeds the ‘acceptable’ ratio, which is 60% in the year of consolidation, reduced by 5%-points annually over the course of 7 years, down to 25% in year 8; and
(ii) the annual amount of interest exceeds EUR 1 M.
The adopted legislative proposal deviates from the initial legislative proposal, which qualified interest as excessive if and to the extent that the fiscal unity’s overall debt-to-equity ratio exceeded 2:1. The adopted restriction primarily affects domestic or foreign private equity funds and foreign corporates that acquire Dutch companies.
- Dutch cooperatives will be subject to Dutch dividend withholding tax in certain cases considered to be abusive. This could affect certain existing and future cross-border investment structures involving Dutch cooperatives.
- The conditions under which non-resident corporate investors with a substantial interest (≥5%) in a Dutch company will be further restricted and will apply to abusive cases only.
- Profits and losses attributable to foreign permanent establishments will be almost fully ring-fenced. This primarily affects Dutch financial institutions and Dutch oil or construction companies.
- These measures will enter into force on 1 January 2012 following their adoption by the First Chamber of Dutch Parliament. The new restrictions on the deduction of interest will apply only to Dutch target companies included in a fiscal unity on or after 15 November 2011.
Click here to read more on these new rules.