On 3 September 2013, the Dutch government released a bill that will allow for the partitioning doctrine for splitting benefits under the participation exemption to be applied in case of a legislative change.

The government originally released its proposal in June after the Dutch Supreme Court ruled that the doctrine does not apply when there is a change in the law unless the law provided transitional rules.

Under the participation exemption, corporate taxpayers are exempt from Dutch corporate income tax on benefits derived from qualifying shareholdings.  Several conditions must be met for income from shares to fall within the scope of the exemption. If the conditions are not met without interruption, a benefit must be split into a taxable and nontaxable periods.

The bill applies to both a change in the application of the participation exemption as a result of a change in legislation as well as a change in the relevant facts and circumstances.

Therefore, when there is a change in the eligibility of certain shares for the participation exemption, those shares would be revalued at the fair market value at the time of the change. The amount would be frozen and booked into a separate reserve that would be released upon disposal of the participation or in the case of a transfer as a result of a Read More