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Details

  • Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 10/19/2012

The Netherlands - Limitation on excess participation interest (draft decree) 

October 19: A new interest deduction limitation measure for excessive participation interest is effective 1 January 2013 (under section 13I of the Corporate Income Tax Act 1969).

Draft decree

On 12 October 2012, the Deputy Minister of Finance published the draft implementation decree with respect to the deduction limitation for excessive participation interest.


The draft decree:


  • Addresses a conflict concerning the deduction limitation for acquisition holding companies
  • Sets out rules for determining the acquisition price after a reorganization, and for determining that part of the acquisition price to be regarded as a qualifying expansion—which, therefore, does not have to be taken into account in determining the participation debt
  • Emphasizes that the term “reorganization” has been broadly interpreted, and must take place within the “group” (meaning the taxpayer together with its affiliated entities)
  • Includes a provision for the creation or termination of a fiscal unity

In addition to the deduction limitation for excessive participation interest, there is also an interest deduction limitation for acquisition debts. A fiscal unity that has been entered into with a subsidiary that holds participations could result in a conflict between the deduction limitation for excessive participation interest and the deduction limitation for acquisition holding companies. The decree has rules to deal with this situation.


The draft decree will be sent on 12 November 2012 to the Council of State for its recommendations, and then to the Upper House for its consideration of the decree as part of section 13I.


It is intended that the decree would have an effective date of 1 January 2013.


Read an October 2012 report prepared by the KPMG member firm in the Netherlands: Publication of Implementation Decree on the deduction limitation for excessive participation interest




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