Article:

CJEU decision: The Netherlands must allow 'per-element-approach'

22 February 2018

Recovery legislation with retroactive effect; possible switch to a new group taxation regime

The Court of Justice of the European Union (CJEU) ruled in two important cases on the so called 'per-element-approach'. This decision has significant consequences for companies which apply the Dutch fiscal unity regime for corporate income tax purposes.

Recovery legislation

In anticipation of this decision, the Dutch Secretary of Finance announced on October 25, 2017 by way of a letter that recovery legislation will be submitted in order to ‘repair’ the decision of the CJEU. The recovery legislation has consequences for many existing Dutch fiscal unities, as it may result in a higher corporate income tax burden. This may already be the case for the 2017 corporate income tax assessment, as the recovery legislation has retroactive effect to 11:00 am on Wednesday October 25, 2017.

Limit the adverse tax consequences

Depending on the specific circumstances of the case, there are possibilities to limit the adverse tax consequences of this legislation for the future. This must be assessed on a case-by-case basis. In cross-border situations, the CJEU’s decision may result in corporate income tax benefits for the period up to October 25, 2017, 11:00 am.

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