The Netherlands Amends Decree On The Silent Return Arrangement Of A Private Limited Liability (BV or NV)

; posted on
November 13th, 2018

Decree No. 2018/99281 of 2 October 2018 on the tax-neutral return from a private limited liability (BV) or public (NV) company to a business undertaken in unincorporated form was published in Official Gazette No. 62988.

Background

Article 14c of the Corporate Income Tax Law of 1969 contains the framework for the silent return of a BV or NV. This arrangement enables to silently convert a business driven by a public limited company or private company with limited liability, or in an enterprise that is considered equivalent by virtue, into a company which is driven directly at the expense and risk of the continuing shareholders (unincorporated form).

The taxation of profits arising upon dissolution of a BV (or NV) with only natural persons as stockholders, whereby the former shareholders continue the business in unincorporated form (continuing shareholders), may be deferred if certain conditions – the "Standard Conditions"– are met.

The Decree

The substantive changes of the decree are the following:

  • Subsection 3.5.2 of the decree is amended so all losses incurred in the "returning business" can be passed on, regardless of whether they arose before or after the moment of silent return. Prior to this amendment losses incurred in the tax year during which the silent return took place could not be carried over.
  • Under the amended ninth standard condition about negative hidden reserves, losses have to be taken into account if the value of the asset used to continue the business is lower than the book value of this asset. Meanwhile, under the former standard condition, losses only had to be taken if the value of the business as a whole fell below the book value of that business.
  • The updated twelfth standard condition now describes the condition under which circumstances the shareholder may, after the moment of silent return, deduct a loss on loan from business income and deduct such a loss from income from other activities.

The Decree applies from 10 November 2018 but has a retroactive effect to 2 October 2018.

Source: Dutch Government

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