Currently, for Dutch corporate income tax purposes, a loss for a given year can be set off against the taxable profit of the previous year (loss carry-back) and the six following years (loss carry-forward). The Dutch government has decided by Decision of May 21, 2021 that these rules will be amended as follows with effect from January 1, 2022:
- The limited loss carry-forward of six years will be abolished. A loss can be carried forward indefinitely.
- To the extent that the taxable profit for a year is EUR 1 million or less, that taxable profit can be used in full to set off a loss from previous years.
- To the extent that the taxable profit for a year exceeds EUR 1 million, only 50% of that taxable profit in excess of EUR 1 million can be used to offset losses from previous years.
The above changes are applicable to losses incurred in the years starting from January 1, 2013 and further and are going to be set off against taxable profits realized from the book years as of January 1, 2022. This means that losses incurred before January 1, 2013 can only be carry forward for ultimately nine year. For book years that are calendar years, this means that these losses can be used up to December 31, 2021. After this date, the losses may not be set off anymore.
The qualification of holding and financing losses have been abolished per January 1, 2019. Based on previous legislation, the losses which were qualified as holding and/or financing losses before January 1, 2019 and carried forward could only be set off against profits which were qualified as holding and/or financing profits. In addition to this, the holding and/or financing losses are going to be affected by the above changes per January 1, 2022.
Impact on financial reporting (year-end and interim)
From a tax reporting perspective, the adjustment of the loss carry-forward rules is substantively enacted as per May 21, 2021 for IFRS purposes and enacted as per June 5, 2021 for US GAAP. Therefore companies should reassess the recognition or the valuation allowance on its deferred tax assets relating to compensable losses. Since the new regulations also apply to existing losses available for carry forward from years 2013 onwards, the new regulations may well impact the recognition of existing deferred tax assets. New analysis for scheduling and fiscal forecasting may be required. For IFRS the assessment should be for interim and year-end periods that include May 21, 2021 and for US GAAP interim and year-end periods that include June 5, 2021.
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