Tax aspects when buying a business in Netherlands

General Tax M&A introduction when buying a Dutch business

Should a M&A advisor be informed about the Tax landscape in Netherlands? Tax aspects are of high importance when buying a business. Your advisor needs to be up to date with the tax framework that applies to M&A transactions in Netherlands. Here we mention some aspects that you need to consider when acquiring a company and setting up your tax structure in Netherlands. Tax-efficient acquisition structuring is important to prevent possible tax claims after the acquisition date. Effective planning and structuring can help you avoid complicated legal and regulatory issues in cross-border acquisitions. We provide relevant tax knowledge ourselves in M&A transactions or work with tax specialists that bring in the required taxation knowledge.

Tax M&A issues when setting up legal structure

It is important to create the right legal structure and keep tax aspects into account before doing an acquisition. The legal structure during a M&A transaction should be set-up in such a way that it is most effective for future tax aspects. We can help give you the required tax advice to structure a business sale or purchase in a tax friendly manner.

Tax items related to 'excessive' acquisition debt

Restrictions exist on the deductibility of interest on 'excessive' acquisition debt, including debt owed to third parties. When a Dutch target company is acquired that will be included in a consolidated tax group (fiscal unity) tax regulations exist. This is the case for debt with a Dutch holding company including debt owed to third parties. These rules reduce the effectiveness of tax grouping as a way to deduct interest on acquisition debt from operational profits of the target.

This Tax Bill includes, in addition to the existing anti-base erosion and thin cap restrictions, restrictions on the deduction of interest on acquisition debt. Leveraging Dutch acquisition vehicles that form a consolidated tax group (fiscal unity) with the Dutch target company, so that interest on the acquisition debt can be set-off against the Dutch target company's taxable profits are decreased. The existing anti-base erosion and thin cap rules, which effectively apply to intragroup financing only, have been further decreased to curb the leveraging of Dutch target companies. A Dutch parent company can, upon request, include a Dutch subsidiary in a fiscal unity if it holds at least 95% of its nominal share capital. As a result, Dutch CIT is levied as if the Dutch parent company and the Dutch subsidiary were a single taxpayer. Under the current rules, interest on 'excessive' Acquisition Debt can no longer be deducted from the taxable profits attributable to a Dutch target company.