An overview by Taxand Netherlands
The Dutch tax authorities’ knowledge group has recently issued guidance regarding the deductibility of litigation costs associated with Warranty & Indemnity (W&I) insurance for the acquisition of subsidiaries. They have confirmed that these costs are deductible for tax purposes, even if the buyer’s insurance claim is unsuccessful and they are required to cover the insurer’s litigation expenses.
This clarification aligns with Dutch tax laws and Supreme Court decisions that deem direct acquisition costs as non-deductible. Additionally, while W&I insurance premiums are not deductible, any insurance payouts are exempt from tax. This guidance ensures that litigation costs from W&I insurance claims can be deducted, irrespective of the claim’s outcome.
Tax experts from Taxand Netherlands explain this guidance in more detail here.
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