Background
New Legislation
Comment
On December 13 2002 the under-minister of finance announced a proposal to counter the effects of a Supreme Court ruling of May 24 2002 (for more information please see "Acquisition Expenses to Be Tax-Deductible"). If the bill is adopted it will no longer be possible to deduct expenses relating to the acquisition of a qualifying participation.
Prior to the Supreme Court's ruling the general opinion was that expenses paid in relation to the acquisition of a participation to which the participation exemption applies are not tax deductible. Instead, these expenses are part of the cost price of the participation and are only deductible after the company in which the shares are held is liquidated.
The Supreme Court held that expenses relating to the acquisition of a participation in a domestic subsidiary are tax deductible.
On December 13 2002 the under-minister of finance announced the preparation of new legislation to counter the effects of the court's ruling. The new legislation is intended to have retroactive effect, and would restore the tax treatment of these expenses to the situation in effect prior to the Supreme Court's ruling.
In anticipation of the new legislation, the tax authorities have been instructed to deny all requests to deduct such expenses.
There has been debate about whether the introduction of new legislation with retroactive effect is permissible. On a number of occasions Parliament has been reluctant to approve this way of resolving undesirable situations. However, Parliament has usually approved such legislation.
As it is not certain that the new legislation will be accepted, with or without retroactive effect, the extent to which past acquisition expenses of subsidiaries have not been taken as a deduction should be examined. Where the statute of limitations is still open, supplemental tax returns or objections may be filed.
For further information on this topic please contact Waldo Kapoen or Jochem de Koning or Albert Theunissen at Loyens & Loeff by telephone (+31 20 578 5785) or by fax (+31 20 578 5800) or by email ([email protected] or [email protected] or [email protected]).