On 27 February 2026, the Dutch Supreme Court ruled in ECLI:NL:HR:2026:298 that part of the Dutch demerger facility in corporate income tax is incompatible with the EU Merger Directive.
The case
A Dutch funeral insurer, owned by a Luxembourg company, wanted to sell its business to an unrelated buyer. The plan was a demerger of the business into a new company, followed by a sale of the share in that company for €55,700,000. The demerger took place on 11 September 2018 and the share was sold the next day. On 24 November 2017, the inspector had refused to confirm that the demerger facility applied.
Under Article 14a(6) of the Dutch Corporate Income Tax Act, the facility does not apply if a demerger is mainly aimed at avoiding or deferring tax. A sale to an unrelated party within three years leads to a presumption that there were no business reasons.
The ruling
- A rule that sets a general presumption of tax evasion or avoidance, with no initial evidence from the authorities, is not compatible with the Merger Directive. To that extent, the Dutch presumption must be set aside.
- A sale within three years does not mean by itself that business reasons are missing. That holds even if the intention to sell existed before the decision to demerge.
- Avoidance or deferral falls under the rule only if the tax motive was decisive and the facility would undermine the aim of the Directive.
- The inspector must provide at least initial evidence. Simply disputing the business reasons is not enough.
The court also noted that shareholder motives, such as the wish to sell the activities, can be business reasons. Both the end goal and the route to it must be driven by such reasons. The case goes to the Court of Appeal of 's-Hertogenbosch.
What to check
- Groups planning a demerger before a sale should review the Dutch position in light of this ruling, and record the reasons for the chosen route.
- Past refusals based on the three-year presumption may deserve a second look, if they are still open.
- The anti-abuse rule itself remains. Only the automatic presumption falls away.
mr. J. el Khalfioui LL.M.