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Treatment of Currency Losses and Interest-Free Loans Under the Dutch Participation Exemption
Review of Case 17/03918 of the Supreme Court of the Netherlands
The case discusses whether the participation in an Irish subsidiary of a Dutch company qualifies as a low-tax participation and thus is excluded from the Dutch participation exemption benefit. In calculating the tax burden of the Irish subsidiary, the Supreme Court of the Netherlands has discussed the impact of foreign currency losses and the reclassification of an interest-free loan as hidden dividend distribution. In this article, Gabriela Capristano Cardoso provides an analysis of the case 17/03918 decided by the Supreme Court of the Netherlands on November 2nd, 2018, and discusses its implications in the international tax environment.
1. Facts
Case 17/03918, decided by the Supreme Court of the Netherlands on November 2nd, 2018, referred to the appeal in cassation of the decision in case 16/01196 by the Arnhem-Leeuwarden Court of Appeal on July 4th, 2017.
The appellant, X Holding BV (hereinafter: X Holding), is the sole shareholder of an Irish company, A Limited (hereinafter: A Ltd). X Holding’s parent company, B Ltd, a company incorporated in South Africa, holds 100 % of the shares in C Ltd, a South African subsidiary of the group. Moreover, C Ltd holds the shares of D Holdings BV...