Taxation and File Sharing in Mergers and Acquisitions for the Netherlands

In recent years the Dutch tax framework for mergers and acquisitions that cross borders has seen major modifications. These changes affect fundamental decisions that potential buyers must take. It is important to decide whether to acquire shares or assets, and what is the best vehicle for acquisition. This article examines these changes in a brief manner, based on current tax legislation, up to and including Tax Plan 2021 which generally came into effect in the year 2019.

The most common way for a party to acquire control over a Netherlands-incorporated company is through a public bid for all issued shares. This is often a share-for-share swap, but may also involve securities (e.g. bonds and convertible instruments). In rare instances tender offers can be made to secure securities with less than 30 percent of the voting rights in the desired target (e.g. America Movil’s partial bid for KPN in 2012, and Pon Holding’s bid to purchase Accell Group in November 2018).

A Statutory merger is a possible method of acquiring control of a Dutch-incorporated company. This involves the surviving company taking over by law all assets and liabilities from one or more disappearing firms, while dissenting shareholder have appraisal rights that allow the company to withdraw in exchange for cash compensation. The post-bid cash-out merger file sharing in mergers and acquisitions for the Netherlands of Wright Medical Group with a Stryker subordinate in 2020. Statutory mergers can be domestic or cross-border within the European Economic Area (EEA) but not between a Netherlands-incorporated company and a foreign company (e.g. Delaware corporation).

The acquiring company must be a Dutch public liability company (NV) with its headquarters in the Netherlands, or in cases of misuse, a hybrid entity as defined by a Dutch/EEA Tax Treaty. Additionally WHT — which is equal to the highest CIT rate — will apply to interest paid at arm’s length as well as royalty payments between an affiliated entity located in the Netherlands and an affiliate that is based outside the Netherlands, unless they are attributable to permanent establishment (PE) in the country of acquisition.

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