On 25 November 2011 the Dutch Supreme Court ruled in 3 cases on loans not negotiated on commercial terms granted to affiliated companies. The Dutch Supreme Court provided Dutch tax practice with rules with respect to the fiscal treatment of loans.
The civil qualification is decisive when determining whether or not a cash flow to an affiliated company is considered a loan or capital from a tax perspective. Therefore, a loan according to civil law (debtor has a legal obligation to repay) is a loan for tax purposes, unless specific conditions are not met. The Dutch Supreme Court cases can also lead to adjustments in the interest conditions, in order to comply with the arm’s length principles.
Loan transferred in informal capital because of this new case law? A waiver might be considered part of the acquisition price (informal capital), which will increase the deductible liquidation loss of the creditor. This facility still gives tax planning opportunities.