The government of the Netherlands has clarified the rules on how fiscal unities should allocate tax losses to subsidiaries when they leave the group. Joop Wijn, the Dutch state secretary of finance, on October 1 2004 issued a decree that answers taxpayers' queries on the fiscal unity rules first introduced on January 1 2003.
For Dutch corporate income tax purposes, tax losses generated by a fiscal unity are attributed to the company that heads the fiscal unity. When a subsidiary leaves the fiscal unity, the tax losses generated before it formed part of the fiscal unity remain with the subsidiary. But tax losses incurred during the period when the subsidiary was part of the fiscal unity remain with the parent company.
But the new fiscal unity regime that entered into force on January 1 2003 established that the tax losses of a parent company can be granted to a subsidiary when it leaves the fiscal unity if certain conditions are met. The decree, issued because of confusion among taxpayers, clarified these principles.
"The issue is now pretty clear," said Victor Juttmann, a member of Freshfields Bruckhaus Deringer's international tax group in Amsterdam. "The answer the Finance Ministry gave to these questions is one that I would have expected anyway, but it does clarify some outstanding issues."
Simon Briault
