New Knowledge Document On Transaction Costs – Tax Authorities

Costs relating to an acquisition or sale of a participation
(“transaction costs”) are not deductible under Dutch tax
law (participation exemption).

On 1 February 2024, the Tax Authorities published an updated
knowledge document regarding transaction costs following Supreme
Court cases. In these so-called “December cases”, the
Supreme Court provides direction on the meaning of transaction
costs. Despite this clarification, the cases also raise questions.
This knowledge document from the Tax Authorities attempts to
provide guidance in on the definition of transaction costs.

Before the qualification of transaction costs can be made, it
needs to be determined to which company these costs should be
allocated. The so-called ‘benefit test’ is key to assess
this allocation. The benefit test focuses on which entity benefits
from the activities and/or revenues that incurred the costs. The
motive behind the costs may be taken into consideration, as well as
who is usually liable for certain costs in arm’s length
transactions.

Consequently, the knowledge document discusses various elements
of the December cases and highlights issues such as mixed costs,
fiscal unity scheme, charging of transaction costs and burden of
proof. Furthermore, the knowledge document identifies a number of
cost types and discusses whether these costs constitute
(non-deductible) transaction costs. Some examples are listed
below:

• Data room




• Vendor due diligence




• Bonuses




• Warranty & Indemnity insurance




• Notary deed of transfer

The knowledge document serves as an instruction on how the Tax
Authorities deals with transaction costs. It is not guaranteed that
this application will be followed by a court at all times. The
entire document can be found here (only in Dutch).

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.