Dutch Supreme Court clarifies anti-abuse test for tax-neutral demergers

The Dutch Supreme Court issued an important decision on 27 February 2026, addressing the application of the Dutch tax-neutral demerger facility.

The tax neutral demerger facility allows a legal demerger (referred to here simply as a "demerger") to take place in a tax-neutral manner, provided that certain conditions are met. One of these conditions is that the demerger cannot be aimed primarily at the avoidance or deferral of taxation. The Dutch Corporate Income Tax Act includes a statutory presumption deeming a demerger to be aimed primarily at the avoidance or deferral of taxation if the direct or indirect ownership in either the demerged or demerging company is transferred to a third party within three years after the demerger. Taxpayers can, in such case, only apply the tax-neutral demerger facility if they are able to demonstrate that the demerger was primarily based on business motives, such as the restructuring or rationalization of the operational activities of the demerging company.

The Dutch tax-neutral demerger facility for both domestic and cross-border demergers is based on the European Union (EU) Merger Directive (Council Directive 2009/133/EC). However, the EU Merger Directive only allows for a presumption of abuse if the demerger is not carried out for valid commercial reasons, such as the restructuring or rationalization of the demerging company's activities. In its 27 February decision, the Dutch Supreme Court determined that disposal of the shares in a demerged company within three years does not necessarily mean that the demerger is not carried out based on valid business reasons or that the demerger is aimed at the avoidance or deferral of taxation, even if an intention to dispose of the shares to a third party already existed before it was decided to proceed with a demerger. Therefore, the Dutch Supreme Court ruled that the statutory presumption of abuse in the Dutch Corporate Income Tax Act is not justified and not in line with the EU Merger Directive.

As a result, the burden of proof cannot automatically be shifted to the taxpayer. Instead, the tax inspector must first provide at least prima facie evidence that the demerger lacks valid business reasons or that the demerger is aimed primarily at the avoidance or deferral of taxation.

The Dutch Supreme Court's decision is highly relevant for restructurings followed by third-party disposals, including carve-out transactions, regulated divestments and distressed sales. Following the decision, tax-neutral treatment cannot be denied solely on the basis that the shares of the demerged or demerging company will be transferred to a third-party within three years after the demerger (even if, prior to deciding on the demerger, there was already an intention to dispose the demerging company to a third-party). There must be more substantiated evidence of abuse to deny the tax neutral demerger facility.

In addition to the above, the Dutch Supreme Court confirms that, in assessing whether a demerger is based on valid business reasons, it is decisive that both (1) the overarching aim of the transaction (such as a carve-out) and (2) the chosen route (i.e., the separation of a Dutch business through a legal demerger) are driven by such valid business reasons. Finally, the Dutch Supreme Court mentioned that shareholder-driven motives, including the intention to sell the demerged activities, may qualify as valid business reasons.