In a judgment of May 24 2002 the Dutch Supreme Court ruled that expenses relating to the acquisition of a participation in a domestic subsidiary are tax deductible. These expenses may be deducted in the year of acquisition.
The judgment reverses earlier rulings in which the Supreme Court decided that acquisition expenses were to be capitalized as part of the cost price of the subsidiary purchased. The previous decisions left undecided the question of whether these expenses could be taken as a deduction in the year of alienation. In its May 24 2002 decision the court reconsidered previous jurisprudence and decided that the capitalization of acquisition expenses as part of the cost price is no longer mandatory (but remains permissible).
The Supreme Court considered a situation in which the acquisition expenses were not deducted in the year of acquisition, but instead were capitalized as part of the cost price of the subsidiary purchased. In this case the acquisition expenses may be taken as a deduction in the year of alienation. In the interim, deduction (depreciation) does not appear to be possible.
To the extent that acquisition expenses are related to a direct or indirect foreign subsidiary to which the participation exemption applies, the deduction is generally denied. The European Court of Justice has been requested by the Supreme Court to decide whether this is contrary to EU law.
Following the judgment of the Dutch Supreme Court, it is advisable to check whether past acquisition expenses of subsidiaries have not yet been deducted. Where the statute of limitations is still open, supplementary tax returns or objections may be filed.
For further information on this topic please contact Waldo Kapoen or Jochem de Koning at Loyens & Loeff by telephone (+31 20 578 5785) or by fax (+31 20 578 5800) or by email ([email protected] or [email protected]).