Tax In Distressed Situations Netherlands

DEBT RESTRUCTURINGS

GENERAL

1. Does debt have a specific meaning for tax purposes?

There is no specific definition of debt for Dutch tax purposes. The Dutch civil law form is in principle decisive in this regard. There are three limitative exceptions where the loan is to be regarded as equity for Dutch tax purposes, being (i) the sham loan, (ii) the bottomless pit loan, and (iii) the profit participating loan. If one of these three exceptions does not apply, the loan is considered debt for Dutch tax purposes. Unless specifically mentioned otherwise, the remainder of this commentary assumes that the debt is also treated as debt for Dutch corporate income tax purposes.

Next to the recharacterization of certain debt as equity for Dutch tax purposes, it must be considered whether a loan is considered businesslike or non-businesslike. A loan is considered non-businesslike, if an independent third party would not, under the same conditions and circumstances, have provided the loan and