Liquidation Loss Allowed Notwithstanding Use Of Irish Group Relief Regime

On 21 March 2025, the Dutch Supreme Court ruled that a taxpayer is allowed to deduct a liquidation loss on its participation in a liquidated subsidiary that transferred losses to group companies under the Irish group relief regime in the years prior to the liquidation. This Supreme Court judgment provides a favorable outcome for taxpayers.

Background

Pursuant to the participation exemption regime, benefits derived by Dutch corporate taxpayers from qualifying participations are exempt and losses incurred with respect to such participations are non-deductible for Dutch corporate income tax (CIT) purposes. As an exception to this rule, the loss suffered upon the liquidation of a qualifying participation is deductible as 'liquidation loss' if certain conditions are met. The rationale of the liquidation loss exception is that losses should be deductible at least once, by allowing the taxpayer to recognize a loss where the subsidiary can definitively no longer set off