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18 March 20243 minute read

Deductibility of transactions costs for Dutch corporate income tax purposes

The Dutch tax authorities have provided further clarity on their interpretation of recent Dutch case law regarding the deductibility of transaction costs (aan- en verkoopkosten deelneming).


Current Legal Framework

Transaction costs must be allocated to the company benefitting from the activities and/or revenues that led to the costs, considering factors such as the motive for incurring them. If borne by the shareholder (seller or purchaser), these costs may not be deductible for corporate income tax purposes under the “deduction prohibition” (aftrekverbod).

According to Dutch case law, the deduction prohibition applies only to costs directly causally related to the purchase or sale of a participation. Costs incurred solely due to the transaction, without which they would not have occurred, are not deductible. Naturally, this only applies if the transaction ultimately goes through.

In a ruling dated December 22, 2023, the Dutch Supreme Court specified that the deduction prohibition does not apply if the costs are not useful or necessary for completing the transaction. They stated: "...the farewell bonuses were not paid with the intention of achieving the disposal of that participation...even if they would not have been granted and paid without the disposal of the participation having taken place."

This ruling indicates a stricter interpretation of the deduction prohibition, potentially making it easier to argue for the deductibility of certain transaction costs.


Position Dutch tax authorities

In light of recent case law developments, the Dutch tax authorities have issued a knowledge document (refer to link for the full document) outlining their interpretation. Included are examples of costs they deem deductible or non-deductible. Initially, the Dutch tax authorities appear cautious in recognizing the deductibility of transaction costs. Below is a non-limitative list of examples of costs they have expressed their views on.

We do note that this represents policy of the Dutch tax authorities only on the basis of their interpretation of Dutch case law. As they also note for certain cost items, the actual deductibility of costs ultimately depends on the specifics of each case. Nevertheless, the knowledge document offers a degree of certainty useful for transactional contexts.


Key takeaways

Whether costs incurred in the context of a transaction are deductible depends largely on the underlying engagement. This often entails that, before entering into an engagement, parties should consider which services are rendered and whether such services should be covered under a separate engagement. Our DLA Piper tax team can assist you in this. For more information, please reach out to one of the authors listed above.

Non-limitative list of (non-)deductibility based on position Dutch tax authorities

  • Information memorandum
  • Purchaser long list and short list
  • Letter of intent
  • Memorandum of understanding
  • Due diligence, unless insofar significantly important for financing
  • Vendor due diligence (VDD)
  • Data room
  • Approval competition authority
  • Success fee/ no cure no pay
  • Warranty and Indemnity (W&I) insurance
  • Sale- and purchase agreement
  • Notary deed of transfer

  • Farewell bonuses (based on Supreme Court ruling)
  • Results of currency forward contracts

  • Preliminary research costs for potential expansion investments: Deductible if no specific target is identified yet
  • Costs for preliminary research/exploratory study on sale of participation: Depending on the engagement. Deductible if no concrete sale intention exists
  • Costs for preparation of sale: depending on circumstances, matter of allocation
  • Retention bonus: depending on engagement and specifics
  • Purchase price allocation costs: Deducible if solely incurred due to obligations arising from accounting law
  • Mixed costs: Applying an allocation key