The Dutch tax regime for cross-border mergers and acquisitions have changed significantly in recent years. These changes will affect fundamental decisions a prospective purchaser must take. This includes deciding whether or not to purchase shares or assets, and which method of acquisition will be used. This article discusses these developments briefly, based on current tax legislation, up to and including Tax Plan 2021, which is primarily in effect since 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 may also involve securities (e.g. bonds and convertible instruments). In rare cases tender offers can be made for securities that comprise less than 30% of the voting rights of the targeted company (e.g. America Movil’s bid for KPN in 2012 as well as Pon Holdings the bid for Accell in November 2018.
A statutory merger is yet another method of taking control of the assets of a Dutch company. The surviving company being legally able to acquire all assets and liabilities from one or more disappearing firms while shareholders who do not agree with the merger have appraisal rights which allow them to leave in exchange for cash compensation. The post-bid cash-out merger of Wright Medical Group with a Stryker subordinate 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 must be a Dutch public liability company (NV) located in the Netherlands, or in cases of abuse, a hybrid organization as defined in a Dutch/EEA Tax Treaty. Furthermore WHT — equal to the highest CIT rate applies to arm’s-length interest and royalty payments between an affiliated entity based in the Netherlands and an affiliate established outside of the Netherlands, in the event that they are not attributable to an establishment permanent (PE) in the acquiring country.