Global Tax Alert | 8 May 2013

Dutch Supreme Court provides new guidance on shareholder loan doctrine

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Executive Summary

In a new ruling issued on 3 May 2013, the Dutch Supreme Court provided further guidance on its shareholder loan doctrine. The doctrine was originally set forth by the Court in November 2011.1

In short, based on the case law of the Dutch Supreme Court, a loan is considered not to have been provided under arm's length considerations, i.e., shareholder motives, if a Dutch corporate taxpayer provides a loan to a related party and accepts a credit risk which a third party – not being a shareholder of the aforementioned entity – would not have accepted, not even for a higher interest compensation. As a consequence, any losses incurred by the Dutch corporate taxpayer in relation to this loan, are considered non-deductible for Dutch corporate income tax purposes.

New ruling

In its new ruling, the Dutch Supreme Court nuanced its doctrine with respect to loans provided on the basis of shareholder motives. Based on this Supreme Court case, in the situation in which the creditor not solely provides a loan, but concurrently also acquires a share interest in the debtor, the Dutch Supreme Court ruled that a loan should not be considered to have been provided on the basis of shareholder motives, if:

  • The taxpayer was not yet a shareholder of the debtor at the moment directly before the loan was granted;
  • The Dutch corporate taxpayer became a shareholder in the debtor through the allocation of shares or otherwise became entitled to the profits of the debtor as part of granting the loan; and
  • The (joint) owners of the majority of the share capital interest in the debtor did not provide loans to the debtor.

In such case, the function as shareholder is considered to arise from the granting of the loan. The “at arm's length” nature of the loan and the possibility to write down the loan for Dutch tax purposes, should not be denied. In other words, if the above conditions are met, a Dutch corporate taxpayer holding risk bearing capital may still incur a deductible loss on the funds provided as a loan.

The current Supreme Court case illustrates that its doctrine on shareholder loans is evolving and its bounds remain to be set. Consequently, in each individual instance it is necessary to carefully assess whether or not a loss incurred on a shareholder loan may be tax deductible, as well as to prudently document the reasons and conditions underlying the provision of any new shareholder loans. This is even more important as these kinds of shareholder loans are under close scrutiny from the Dutch tax authorities.


1. The Dutch Supreme Court set out its doctrine regarding losses incurred on loans held by Dutch corporate taxpayers with respect to debtors in which the Dutch corporate taxpayer also holds a share interest, i.e., shareholder loans. The case law of the Dutch Supreme Court also applies if the debtor is a related party of the Dutch corporate taxpayer.

For additional information with respect to this Alert, please contact the following:

EY Belastingadviseurs LLP, Amsterdam
  • Johan van den Bos
    +31 88 407 1457
EY Belastingadviseurs LLP, Rotterdam
  • Michiel Swets
    +31 88 407 8517
Ernst & Young LLP, Belgium-Netherlands Tax Desk, New York
  • Dirk Stalenhoef
    +1 212 773 3390
Ernst & Young LLP, Belgium-Netherlands Tax Desk, Chicago
  • Frank Schoon
    +1 312 879 5508
Ernst & Young (China) Advisory Limited, Belgium-Netherlands Tax Desk, Shanghai
  • Bas Leenders
    +86 21 2228 4782

EYG no. CM3420