This is contribution number 15 by KPMG Meijburg & Co regarding loss carry forwards for corporate income tax purposes in the Netherlands.

Introduction

In December, 1994, the Netherlands Parliament approved a bill which has replaced the former 8 year loss carry-forward provision by an unlimited loss carry-forward provisions as of January 1, 1995.

General

The new legislation provides for an unlimited carry-forward of losses to offset future profits. The loss carry-back provision, which limits the carry-back of losses to 3 years, is not affected by the legislation.

The new legislation applies to:

a) losses which are incurred from the beginning of the year 1995; and

b) unrelieved losses which, on the basis of the old rules, are still outstanding at the end of 1994. This category includes "old" start-up losses. These are losses incurred during the first six years following the company's incorporation. Such start-up losses have always been subject to an unlimited carry-forward rule.

The new rule applies to, for example, ordinary losses which were incurred in 1986. These ordinary losses should, according to the old rules, have expired at the end of 1994. Under the transitional legislation, the carry- forward period for these losses is extended by a year, which means that they also qualify for the unlimited carry-forward.

Completion of 1995 Returns

In order to qualify for the new unlimited loss carry-forward the losses which have not yet been set off against profits at the end of 1994 must be certified by the inspector at the request of the taxpayer. This request should be submitted at the same time as the corporate income tax return for the year 1995.

If the request is not made with the return, the losses which have not been set of against profits at the end of 1994 may no longer be carried forward. This also applies to "old" start-up losses.

Remaining Issues

There are still uncertainties regarding the practical implementation of the new loss carry-forward provisions. It is for instance unclear how fiscal unities will be treated where one or more of the companies still has losses which were incurred before the establishment of the fiscal unity.

This message is most likely to be relevant for corporations with taxable income/losses in the Netherlands.

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.

Further information can be obtained from Mr Alfred GM Groenen, MCL, KPMG Meijburg & Co, Amsterdam (Netherlands); fax 31 (20) 656 1247.