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Transforming debt restructuring in the Netherlands

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Jian-Cheng Ku, Jean Paul Dresen and Mehdi el Manouzi of DLA Piper take a deeper look the implications of the WHOA, a new restructuring tool adopted in the Netherlands.

As the economic downturn ensues, more companies are struggling to meet their financial obligations whilst lenders are seeking alternatives to secure their outstanding financial claims. In this article, the authors will reiterate some of the recent short-term Dutch tax measures to improve tax liquidity, which may offer some relief in respect of meeting respective financial obligations during the COVID-19 pandemic. Furthermore, the authors specifically address the development in the Netherlands in terms of corporate debt restructuring: the introduction of the WHOA and its related Dutch corporate income tax consequences.

Dutch tax measures to improve liquidity during the COVID-19 pandemic

In the short-term, meeting financial obligations can be managed by making use of a number of measures which the Dutch government has taken to enhance liquidity for Dutch companies.

Firstly, as an immediate response to the COVID-19 pandemic, upon request, a deferral of payment of some regular business taxes (such as wage tax and VAT) can still be obtained for a period of three months with a possibility to extend the period. Furthermore, the standard tax interest rate, as well as the rate on overdue tax, is temporally adjusted to 0.01%. Companies also had the opportunity to have provisional 2020 corporate income tax assessments reduced significantly or even to zero.

Another measure that the Dutch government took is to allow corporate taxpayers to effectively set-off anticipated tax losses in 2020, in advance with their 2019 taxable profits, by creating a so-called deductible ‘corona-reserve’ in their FY 2019 corporate income tax (CIT) return. In this manner, the cash refund of any set-off of 2020 tax losses with 2019 taxable income is accelerated, because the taxpayer does not have to wait until he files the 2020 CIT return. 

Certain conditions need to be taken into account when creating a ‘corona-reserve’, most importantly the amount of such a reserve is: 

  • Limited to an expected 2020 tax loss which results from the COVID-19 pandemic; 

  • Cannot exceed the total of expected 2020 tax loss; 

  • Cannot exceed the taxable profit in the 2019 tax return; and 

  • Must be released in the 2020 tax return.

The WHOA: a new Dutch restructuring option

To improve effective debt restructuring for businesses in distress, the Dutch legislator has published a legislative proposal for a new pre-insolvency tool, which seeks to combine elements of the UK scheme of arrangement and the US Chapter 11 procedure. This bill is called ‘Act on the confirmation of private restructuring plans’ (Wet Homologatie Onderhands Akkoord) or simply WHOA.

In essence, the WHOA provides a business in financial distress, its shareholders or creditors with the option of presenting a debt restructuring agreement, which can subsequently be submitted to a court for approval within a limited time frame. 

The shareholders and creditors will be ranked in different classes for the purpose of voting on the debt restructuring agreement. Once the debtor’s shareholders and creditors are divided into classes and a draft restructuring agreement has been prepared, the agreement will be put to a vote by the separate classes of shareholders and creditors. A shareholders' class is deemed to have voted in favour of the debt restructuring agreement, if shareholders representing at least two-thirds of the value of the issued capital in the debtor vote in favour. A creditor's class is deemed to have voted in favour of the debt restructuring agreement if creditors representing at least two-thirds of the value of the outstanding claims vote in favour.

Provided that at least one class of shareholders or creditors, that would in case of bankruptcy of the debtor expectedly receive a (partial) return on its claim, have voted in favour of the debt restructuring agreement, the court can be asked to approve (homologeren) the agreement. If the court approves the debt restructuring agreement, it becomes binding on the debtor and all shareholders and creditors whose rights are affected by the agreement. 

The parliamentary history to the WHOA does not specifically address the relevant Dutch corporate income tax consequences that may arise for the relevant debtor, creditor or the shareholders. It simply relies on the existing rules in the Dutch corporate income tax act. Below, we will address some general corporate income tax rules for the Dutch debtor company subject to the WHOA, their creditors and its shareholders which must be taken into account in assessing the WHOA-agreement.

For the Dutch debtor company, generally, any waiver of existing debt as a result of a restructuring agreement based on the WHOA should result in a taxable profit at a corporate income tax rate of 25% (2020 rate). However, a specific exemption may apply to the extent that the cancellation took place as a result of a genuine non-recoverability risk of the debt, which is likely to be the case in any WHOA proceeding. Such an exemption only applies insofar the taxable amount (if any), exceeds, the outstanding amount of outstanding tax losses of the debtor (if applicable), which effectively results in the debtor no longer being able to use these tax losses. That potential loss of a future tax asset must be taken into account in the restructuring plan or agreement itself. 

Typically, a Dutch creditor is allowed to take a tax deductible write-off on any non-recoverable part of an outstanding receivable as part of any WHOA restructuring. Based on the Dutch general sound business tax principles (goedkoopmansgebruik) such write-offs may have occurred already prior to any start of a WHOA proceeding.

For certain intra-group receivables, it is important to address that certain claw-back rules in respect of such earlier write-offs may apply. Furthermore, in the event that the restructuring agreement as part of the WHOA results into a conversion of debt into equity (which is also an option), any previous Dutch write-off on such debt may effectively have to be taken back over time depending on the valuation of the surviving company going forward.

For any existing shareholder holding a qualifying interest (generally 5% or more) in the debtor company, it may be worth noting that in the event that the WHOA results in a full conversion of debt into equity and its shareholding in the debtor is effectively lost or reduced to (almost) nil, any economic loss qualifies for the Dutch participation exemption and therefore does not result in a Dutch taxable loss. Dutch corporate income tax rules basically only allow for a taxable loss upon a full and final liquidation of the debtor company. Existing shareholders should bear this effect in mind as part of the restructuring agreement under the WHOA. 


With an ongoing economic crisis as a result of the global COVID-19 pandemic, companies are challenged to meet their financial obligations. Although some Dutch tax measures may offer relief in the short-term, it is expected that some companies may have to undergo a more thorough debt restructuring. 

With the WHOA, there is a feasible Dutch legal option to successfully restructure financially distressed companies in a relatively short period of time. Dutch taxpayers – whether acting in their capacity as the debtor company, the creditor or the shareholder – should carefully take into account the Dutch tax consequences resulting from a restructuring agreement under the WHOA.

Jian-Cheng Ku

T: +31 20 541 9911 


Jean Paul Dresen

T: +31 20 541 9804 


Mehdi el Manouzi

T: +31 20 541 9354


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