Costs regarding non EU subsidiaries are not tax deductible
The Lower Tax Court of Amsterdam does not doubt that the non-tax deductibility of costs relating to non EU subsidiaries is in accordance with EU legislation.
In the case at hand, a Dutch resident BV was a holding company for several subsidiaries both in and outside the EU. For this purpose the EU zone is deemed to include the countries that participate in the European Economic Area (EEA). The Dutch BV incurred several costs that related to its foreign subsidiaries and claimed a tax deduction for those costs. The Dutch Revenue did not allow the deduction of costs insofar those related to subsidiaries outside the EU.
The Amsterdam tax court had to decide whether this limitation was in conflict with the principles of free movement of capital as included in the EU treaty. According to the taxpayer the EU treaty also prescribes free movement of capital with third countries. The court decided, however, that it is clear that the Dutch rules are not in conflict with those EU principles and that it is not necessary to ask for a resolution from the European Court of Justice. According to the court, the EU treaty does not prohibit limitations in the capital movement with third countries.
Important note: Due to a change of Dutch tax law costs regarding foreign subsidiaries can be tax deductible in The Netherlands as of 2004. The case mentioned above has relevance only for tax years prior to 2004.
