NETHERLANDS Law and Practice Contributed by: Herald Jongen, Maarten de Boorder, Samuel Garcia Nelen and Jelmer Kalisvaart, Greenberg Traurig, LLP
on the core technologies or services that drive their competitive edge. • Unlocking value for shareholders: Spin-offs can help unlock shareholder value by separating high- growth potential assets from mature or slower- growing parts of the business. This restructuring makes the spun-off entity more attractive to inves- tors, particularly in sectors like software, cloud services or AI, where growth prospects are strong. • Fostering innovation and agility: In fast-paced tech environments, spin-offs enable the creation of smaller, more agile companies that can innovate without the bureaucratic constraints of a larger parent organisation. This is often driven by a need to develop emerging technologies, such as fintech, cybersecurity or machine learning, in a more agile way. • Regulatory or market pressure: Increasing regulato- ry scrutiny, especially concerning anti-competitive behaviour in big tech, can also be a driver. Compa- nies might spin off divisions to comply with regu- lations, such as in cases where there is pressure from European regulators to break up monopolistic structures. • Private equity and M&A strategies: Spin-offs are also often used as part of larger M&A strategies, particularly when private equity is involved. A spin- off can prepare a business unit for eventual sale or public listing, attracting investment in a more focused entity that operates independently from the parent. 5.2 Tax Consequences Spin-offs in the Netherlands can be structured as a tax-free transaction at both the corporate level and the shareholders’ level. For a tax-free spin-off at the corporate level in the form of a demerger, the following key requirements need to be met. • The demerging and acquiring entity are tax resident in the Netherlands, the EU or the European Eco- nomic Area (EEA). • The spin-off is not predominantly aimed at avoid- ing or deferring taxation – ie, there must be sound business reasons. Unless counterevidence is pro- vided, sound business reasons are deemed not to
be present if shares in the demerging or acquiring entity are transferred to a third party within three years after the demerger. • The demerging and acquiring entity must be sub- ject to the same tax regime. • The future levy of Dutch corporate income tax must be assured after the spin-off. However, if some of these further conditions are not met, the spin-off can still occur tax-free but a request should be submitted with the Dutch tax authori- ties prior to the spin-off. In that case, the Dutch tax authorities could allow a tax-free spin-off under cer- tain restrictions. A spin-off in the form of an asset transfer against the issuance of shares by the acquiring entity can also occur tax-free under similar conditions. Relevant dif- ferences of a spin-off in the form of a demerger are that, for a tax-free asset transfer, the acquiring entity can under certain conditions also be a non-EU/non- EEA tax resident; and the transferred assets should constitute (part of) a business. For a tax-free spin-off at shareholder level in the form of a demerger, the requirements are: • the demerging and acquiring entity are tax resident in the Netherlands, the EU or the EEA; and • the spin-off is not predominantly aimed at avoid- ing or deferring taxation – ie, there must be sound business reasons. A spin-off in the form of an asset transfer should not trigger tax at shareholder level. In practice, the Dutch tax authorities increasingly investigate whether suf- ficient business reasons exist for tax-free treatment, particularly if a subsequent disposal is envisaged. Obtaining certainty in advance through entering into
an advance tax ruling remains advisable. 5.3 Spin-Off Followed by a Business Combination
A spin-off followed by a business combination is pos- sible in the Netherlands. Key requirements include:
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