Losses at level of liquidated subsidiary could not be used under group relief regime after liquidation
The Dutch Supreme Court on March 21, 2025, held that a Dutch company was entitled to claim a capital loss on the liquidation of an Irish subsidiary under the Dutch liquidation loss scheme because the unsettled tax losses at the level of the liquidated Irish entity could not be used for loss relief under the Irish group relief regime after the liquidation.
Under the Dutch participation exemption regime, capital losses on participations are generally non-deductible. However, an exception exists pursuant to the Dutch liquidation loss rules, which allows a parent company to recognize a capital loss under specific conditions once the subsidiary’s losses can no longer be offset within the group (the “liquidation loss scheme”). The amount that the parent company can claim as a deductible liquidation loss is determined as the difference between the acquisition price (including any formal and informal capital contributions) and any liquidation payments received. One of the conditions of the liquidation loss scheme is that a liquidation loss cannot result in a deduction at the level of the parent entity if there is still a factual possibility for loss relief (for the losses suffered by the dissolved entity) at the level of the dissolved entity or another group company (the “no-loss relief requirement”).
The Supreme Court found that the no-loss relief requirement was met even though the unsettled tax losses of the liquidated subsidiary would still be available under the Irish group relief regime prior to the liquidation. The court acknowledged that this could lead to double loss relief in certain situations but noted that this outcome is a result of the way the rules were designed by the legislator.
Read an April 2025 report prepared by the KPMG’s EU Tax Centre