Limitation of the liquidation loss scheme
The government wants to adjust the current liquidation loss scheme in the corporation taxation on several points. The liquidation loss scheme entails that a parent company can deduct a loss incurred in a participation when the subsidiary company is dissolved. This action prevents the non-settled losses of the subsidiary from permanently disappearing without any compensation for the parent company. The calculation of the deductible liquidation loss is linked to the capital loss which the parent company incurs on its investment in the subsidiary.
In practice, it appears that international concerns establish structures to have these types of losses artificially occur in the Netherlands. To counteract the erosion of the Dutch tax base which is taking place through the use of such a created deduction of liquidation losses, the following measures are being considered:
- limitation of the liquidation loss scheme to liquidation of subsidiaries in which the parent company has a qualifying interest (material limitation);
- limitation of the liquidation loss scheme to liquidations of subsidiaries which are established in the EU/EER (territorial limitation);
- limitation of the opportunity for long-term deferment of the date of deduction of a liquidation loss (temporal limitation).
For the scheme for so-called discontinuation losses of foreign fixed establishments, similar limitations will apply.
The intended effective date of these measures is 1 January 2021.
More information
Would you like more information? Our specialist will gladly assist you. You can contact Daniël van Meijgaarden, senior taxspecialist at ABAB International, on 0165-531348 or e-mail Daniël.
