The Future for Taxing Dutch Currency Exchanges
The Dutch Supreme Court has ruled that currency exchange gains on loans to which the anti-base erosion rules apply are not liable to tax, though law changes could be enacted as a result of the decision. The clarification on the tax treatment of so-called tainted loans comes after the court ruled on a case concerning a Dutch company which realised a currency exchange gain on a tainted loan, with the court deciding such gains are tax exempt. Taxand Netherlands takes a look at this issue to determine how taxpayers based in the Netherlands will be affected.
"I feel the decision follows the text and logic of the law," said Marc Sanders, partner at Taxand Netherlands. "The tax authorities tried to argue that negative FX results on tainted loans were non-deductible but at the same time that FX gains were taxable, which is unreasonable and not based on the text of the article."
"Taxpayers should review whether FX gains occurred in previous years on tainted loans and whether a final tax assessment has been raised for that year. A revised tax return or an objection can be filed for these years to exempt the FX gain," said Sanders. "Furthermore, taxpayers can consider triggering current FX gains on tainted debts now in order to benefit from the exemption. In general a FX gain is only triggered if the debt is repaid or, for example, converted into equity."
Sanders said the taxpayers that will particularly benefit from this decision are "Taxpayers with debts in another currency than the euro or their functional currency for filing the tax return."
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First published in the International Tax Review, 8 March 2012