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Netherlands: Dutch Supreme Court follows CJEU in “per element” approach

Netherlands: Dutch Supreme Court “per element” approach

The Supreme Court of the Netherlands (Hoge Raad) rendered a final judgment in two corporate income tax cases (for which it had previously requested and in early 2018 received a preliminary ruling from the Court of Justice of the European Union (CJEU)).


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The common issue in both cases is: whether taxpayers, despite being unable to enter into a fiscal unity with subsidiaries established elsewhere in the EU, are nevertheless eligible for benefits from separate elements of the fiscal unity regime as if a fiscal unity with foreign subsidiaries can be entered into—the “per element” approach.

  • One case concerned an interest deduction limitation (profit shifting, under section 10a of the Dutch corporate tax law). The Supreme Court held that, in accordance with the CJEU judgment, this measure was contrary to the freedom of establishment. A bill with “emergency repair” measures was submitted in early June 2018, in response to the CJEU judgment, and these measures would mean that some corporate income tax and dividend withholding tax rules, even in domestic relationships, would have to be applied as if there were no fiscal unity. 
  • The other case involves the deduction of foreign exchange losses on EU participations. The Supreme Court followed the CJEU and held there is no violation of EU law. 


Read an October 2018 report prepared by the KPMG member firm in the Netherlands

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