In recent years the Dutch tax system for mergers and acquisitions across borders has undergone major changes. These changes will affect the fundamental decisions a prospective purchaser must take. These include whether to acquire assets or shares, as well as what will be the vehicle used to acquire. This article will discuss these changes briefly, with reference to the current tax legislation including Tax Plan 2021 which generally came into effect in 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 usually a share-for-share swap, but can also involve securities (e.g. bonds and convertible instruments). In rare instances tender offers may be made for securities that comprise less than 30 percent of the voting rights in the targeted company (e.g. America Movil’s bid for KPN in 2012; and Pon Holdings in its bid for Accell in November 2018.
A statutory merger is a different method of taking control of the assets of a Dutch company. The surviving company acquiring by law all liabilities and assets from one or more disappearing firms while shareholders who do not agree with the merger have appraisal rights that allow them to quit in exchange for cash compensation. the post-bid cash out merger of Wright Medical Group into a Stryker subsidiary 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 has to be a Dutch public liability company (NV) based in the Netherlands or, in the case of misuse, a hybrid entity according to the terms of a Tax Treaty between the Netherlands and the EEA. In addition WHT — equal to the highest CIT rate — will apply to arm’s-length interest and royalty payments between an affiliated entity that is based in the Netherlands and an affiliate established outside of the Netherlands, provided they are not attributed to an establishment permanent (PE) in the country of acquisition.
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