Keywords: Loss relief, Dutch Corporate Income Tax, Changes, Carry Forward

The new changes with regards to restriction on loss relief in the Dutch Corporate Income Tax Act (article 20 CITA) that was included in the Tax Plan 2021 will take effect on January 1, 2022. The Royal Decree[1] regulating this has now been issued. This is due to the fact that the implementation test that needed to be done prior has been executed[2]

With these changes to the loss relief, losses in the CITA will become indefinitely transferable forward (carry forward loss). On the other hand, such losses will only be fully set off in a year up to an amount of € 1 million. To the extent that the taxable losses exceed € 1 million, they will be set off up to an amount of 50% of the taxable profit or the Dutch income of a year, after that profit or that income, respectively, has been reduced by an amount of € 1 million. Both the extension to an unlimited period and the limitation to 50% of the taxable profit, whereby the losses up to €1 million are fully deductible, apply to losses from financial years commencing on or after January 1, 2013, to the extent that these losses are set off against taxable profits or Dutch income earned in financial years commencing on or after January 1, 2022[3]. This means that losses from financial years commenced before January 1, 2013, can be set off up to December 31, 2021 at the latest, based on the term for loss carry-forward applicable to those years. Thereafter, it will no longer be possible to set off losses.

The new formula for the carry forward calculation will look like this (simplified):

1 million + ((50% x (profit year X – EUR 1 million)

It is expected that the complexity of the Dutch loss relief will increase due to these changes. In particular complexity is increased when the measure is carried through to specific sections of the CITA. We are glad to be of any service in helping you apply these new loss relief rules.