On 6 February 2015, the Dutch State secretary of Finance published new guidance regarding the application of articles 14a (split-ups and split-offs) and 14b (legal mergers) of the Dutch Corporate Income Tax Law 1969 (CIT Act).
In the case of mergers, split-ups and split-offs, the transferring company transfers assets and liabilities to one or more receiving companies. If certain criteria are met, the Dutch CIT Act provides for deferral of the taxes that could be charged on the difference between the fair market value of such assets and liabilities and their book value for tax purposes. The deferral is granted under the condition that the receiving company uses the book value of the disappearing company. The tax inspector may, upon a joint request by the companies involved, grant the exemption, even where these companies do not comply with the above-mentioned conditions. In such a situation, additional conditions 'Standard Conditions' may be imposed to safeguard the future corporate income tax claim.
The main changes and additions to the new Decrees are described below.
The Legal Merger Decree
- The approval for requests to permit a carry-forward of losses existing at the time of the merger is also applicable to such requests that are submitted late
- The revaluation at the level of the debtor of a debt claim which will disappear as a result of the merger will no longer be capped at the nominal value of that claim (the fair market value will be used instead)
- The effects of a merger on the innovation box are now contained in a separate Standard Condition
The Split-off Decree
- Approval for retroactive effect does not apply insofar as there is an immediate tax liability
- Clarification is provided in situations where there is a confluence of a split-off and the revaluation reserve (opwaarderingsreserve)of article 13ba of the CIT Act
- Conditions concerning the innovation box, the exemption for foreign permanent establishments, the participation exemption and the credit for foreign business profits have been added
- The conditions relating to the settlement of a (n) (immediate) tax liability have been merged
- A procedure for approving requests that are filed late has been introduced
- The guidance with regard to the confluence of split-ups and the Dutch group regime has been removed from the Decree. This guidance now forms part of the provisions governing fiscal unities
The Split-up Decree
This new Decree is systematically similar to the Legal Merger Decree and the Split-off Decree.