Netherlands: Budget 2013 repeals thin cap rules

Pie Geelen, Deloitte, New York,  Jochem Temmerman, Deloitte, Hong Kong, Aart Nolten, Deloitte, Utrecht

The Netherlands’ proposed 2013 budget published on September 18, 2012 includes the abolition of the thin capitalisation rules. If approved, the rules will be repealed for financial years starting as from January 1, 2013.

Abolition of the rules has been expected because a more specific interest deduction limitation applying to the excessive debt financing of acquisitions of participations was adopted earlier in 2012. At the time the excessive debt financing rules were proposed, the Dutch Ministry of Finance indicated that the thin capitalisation rules might be abolished provided the negative budget impact (€30 million) could be offset by other measures; this appears to have been achieved.

The scope of the new rules on excessively debt-financed participations is different from that under the thin capitalisation rules, so companies will need to carefully assess the impact on their debt-financed participations.

Background

The thin capitalisation rules were introduced in 2004 in response to the decision of the European Court of Justice in the Bosal case, in which the Court ruled that the Dutch tax provision disallowing the deduction of interest expense incurred in connection with investments in foreign participations was incompatible with EU law…

Enjoying this article? To continue reading you need to take out a FREE trial to the Transfer Pricing Library.




Already a subscriber? Sign in here
Disclaimer

Related Articles:

• Brazil: Thin cap rules clarified
• HMRC’s Updated Thin Capitalisation Guidance
• Brazil: Final Thin Capitalisation Rules Introduced
• Australia Issues Guidance Reiterating ATO View on Thin Cap Safe Harbor
• ATO May Apply Arm’s-Length Rate To Interest Despite Thin Cap Safe Harbor