The Netherlands is one of the few countries where a liquidation loss on participations with a shareholding of 5% or more can be taken into account, regardless of the participation’s country of residence. However, an initiative legislative proposal has been submitted in October 2019 that aims to tighten the conditions of the liquidation loss facility as per January 2021. Especially, in the current corona crisis where foreign participations might be loss making, it could be worthwhile considering to liquidate a participation in 2020 in order to make full use of the Dutch liquidation loss facility.
The current liquidation loss facility
Income and losses from participations on which the Dutch participation exemption applies are exempt from Dutch corporate income tax. However, Dutch tax legislation contains an exception in case of liquidation losses of such participations. The liquidation loss for Dutch corporate income tax purposes is calculated by taking into account the difference between the sacrificed amount of the participation and the received liquidation proceeds as a result of the liquidation. At the moment no conditions apply to the participation`s country of residence.
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