Dutch Supreme Court allows liquidation loss despite (possible) prior use Irish relief

On 21 March 2025, the Dutch Supreme Court ruled in favor of a taxpayer claiming a deduction under the Dutch liquidation loss regime. This was despite the fact that the liquidated Irish subsidiary had (or could have) previously transferred losses to other Irish group companies under Ireland’s group relief regime.

The liquidation loss regime

The Dutch liquidation loss regime forms an exception to the general rule that, under the participation exemption, capital gains and losses on qualifying participations are exempt from Dutch corporate income tax (CIT). This exception allows for the deduction of liquidation losses, provided that specific conditions are met—one being the so-called “no-loss-relief condition” (in Dutch: de niet-tegemoetkomingseis) laid down in Article 13d(9)(a) Dutch CIT Act 1969 (now Article 13d(14)(a)).

This condition disallows a deduction if a group company is entitled to any form of tax relief in respect of the unutilized losses of the liquidated entity. However, the letter of the law does not specify whether this condition must be assessed at the time the liquidation is completed, or whether it applies to any losses incurred throughout the subsidiary’s existence.

In the case at hand, the Dutch taxpayer held an Irish subsidiary that had made use of Ireland’s group relief regime for approximately €115 million. Under this regime, a group company may transfer a loss incurred in a given year to another group company with taxable profits in that same year. However, at the time of liquidation, the subsidiary still had significant unutilized losses that—under Irish law—were permanently forfeited.

Key takeaway from the Supreme Court decision

The Supreme Court ruled that the no-loss-relief condition must be assessed at the time the liquidation is completed, not retroactively over the subsidiary’s entire lifetime. Since no group company had any entitlement to the unutilized losses at that time, the condition was considered to be met.

Furthermore, the Supreme Court acknowledged that this interpretation may result in double loss recognition—once in Ireland through group relief, and again in the Netherlands through a liquidation loss deduction. However, it held that such an outcome reflects a deliberate legislative choice by the Dutch legislature. Given that the rule has an anti-abuse character, its interpretation must align as closely as possible with the specific abuse the legislator aimed to prevent, and with the mechanism chosen to do so.

The legislative history shows that the Dutch legislator considered it undesirable for a Dutch parent company to deduct a liquidation loss if the losses of the liquidated foreign subsidiary could still be used elsewhere within the group. Article 13d(9)(a) CIT was introduced to prevent such double use of losses. The no-loss-relief condition must be interpreted objectively: it in principle suffices that foreign tax law provides a possibility for compensation of unutilized losses, regardless of whether such compensation was actually obtained or practically possible.

The Supreme Court reiterated that, in line with the legislator’s intent, a liquidation loss should only be deductible if it is clear that no group company has any right to compensation for the unutilized losses of the liquidated entity. That assessment must be made at the time the liquidation is completed, as this aligns with the structure of the liquidation loss regime, which is based on the definitive forfeiture of the remaining losses. The statutory text does not contradict this interpretation. Furthermore, a broader reading—including relief obtained (or obtainable) in years prior to liquidation—would not be consistent with the aim of the regime.

Conclusion and advice

This decision provides welcome clarity for Dutch taxpayers with foreign subsidiaries: the (possible) prior use of a foreign loss relief regime does not automatically preclude a liquidation loss deduction in the Netherlands—provided that the subsidiary’s remaining losses are permanently lost at the time of liquidation.

However, it cannot be excluded that the legislation will be amended in response to this ruling. We will monitor further developments closely.

If you would like to know more about this case or how it may impact your tax position, feel free to reach out to Anne van der Kooi or Luuk Ursem or one of your regular contacts at Atlas.