A look at the proposed loss relief rules in the Netherlands

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

A look at the proposed loss relief rules in the Netherlands

Sponsored by

Sponsored_Firms_piper.png
The aim of the proposal is a more gradual set-off of losses.

Jian-Cheng Ku and Ilse Lagerweij of DLA Piper Netherlands assess the changes to the 2021 tax budget rules concerning the deductibility of losses.

On October 5 2020, the Dutch Ministry of Finance published an important clarification to its proposed 2021 tax budget rules for the deductibility of losses. In this article, we will provide further details on the proposed rules and highlight what the impact of these rules can be for businesses and taxpayers.

Background

After a recommendation of the Committee Taxation of Multinationals in their report of April 2020, a new regime for loss relief in the corporate income tax act was presented in the 2021 Dutch tax budget. The proposed regime should enter into force as of January 1 2022.



Under the proposed rules, losses can be carried forward indefinitely, but the deduction of losses is subject to a threshold. The aim of the proposal is a more gradual set-off of losses.

What has changed?

The current loss relief regime permits losses to be carried back one year and carried forward six years. After six years, the losses, if they have not yet been utilised, will expire and no longer be deductible.



As mentioned previously, under the newly proposed rules, losses can be carried forward indefinitely. For the carry back of losses, the limitation of one year stays in place.



Compared to the current regime, this is more in line with the so-called ’overall profit principle’ (totaalwinst) in the Netherlands. The overall profit principle must ensure, to the extent possible, that entities are taxed over the total amount of profit or loss during their entire lifetime. Since under the proposed regime losses do not expire, there is no longer a breach of the overall profit principle.



However, the proposed measures do limit the deductibility of losses in terms of the amount per year. Losses can be offset against taxable profits up to a threshold of €1 million ($1.18 million) plus 50% of the taxable profit exceeding €1 million. Therefore, most small businesses will not be limited in their loss deductibility potential.

Transitional law

The rules will enter into force on January 1 2022. The clarification of the Ministry of Finance confirmed that the new rules apply to all losses that occur after January 1 2022 and all losses that are still in place at year-end 2021. The new rules therefore also apply to losses occurred in 2013 that has not yet been deducted, as previous transitional law allowed losses from 2013 to be carried forward for nine years. After January 1 2022, these losses will become deductible indefinitely.

Key takeaways

Although the legislative proposal has not yet been passed into law, the introduction of the indefinite carry forward of losses can be commended, as it aligns with the overall profit principle.



In addition, the proposed loss relief regime is more in line with that of surrounding countries such as Germany, Belgium and the UK. These countries also apply rules that limit loss relief per year instead of by an expiration date.



Lastly, perhaps the most important for now, the transitional law is very favourable, as losses from 2013 and after are deductible indefinitely as from January 1 2022.

 



Jian-Cheng Ku

T: +31 20 541 9911 

E: jian-cheng.ku@dlapiper.com



Ilse Lagerweij 

E: ilse.lagerweij@dlapiper.com


more across site & shared bottom lb ros

More from across our site

Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
A ‘joint understanding’ among G7 countries that ‘defends American interests’ is set to be announced, Scott Bessent claimed
The ‘big four’ firm’s inaugural annual report unveiled a sharp drop in profits for 2024; in other news, Baker McKenzie and Perkins Coie expanded their US tax benches
Representatives from the two countries focused on TP as they met this week to evaluate progress under a previously signed agreement – it is understood
The UK accountancy firm’s transfer pricing lead tells ITR about his expat lifestyle, taking risks, and what makes tax cool
Dolphin Drilling intends to discuss the final liability amount and manner of settlement with HM Revenue and Customs
Winning the case against the 20% VAT imposition was always going to be an uphill challenge for the claimants, UK tax advisers argue
A ‘paradigm shift’ in Chile’s tax enforcement requires compliance architecture built on proactive governance, strategic documentation and active monitoring of judicial developments
Gift this article