NETHERLANDS Law and Practice Contributed by: Herald Jongen, Maarten de Boorder, Samuel Garcia Nelen and Jelmer Kalisvaart, Greenberg Traurig, LLP
• the future levy of Dutch corporate income tax must be assured after the spin-off. However, if not all of these further conditions are met, the spin-off can still occur tax-free but a request should be submitted to the Dutch tax authorities prior to the spin-off. In that case, the Dutch tax authorities could allow the tax-free spin-off under certain 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. Regarding relevant differences for a spin-off in the form of a demerger, for a tax-free asset transfer, the acquiring entity can under certain conditions also be a non-EU/non-EEA tax resi- dent, and the transferred assets should consti- tute (part of) a business. For a tax-free spin-off at the shareholder level in the form of a demerger, it is required that: • the demerging and acquiring entity are tax residents of the Netherlands, the EU or the EEA; and • the spin-off is not predominantly aimed at avoiding 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 the shareholder level. 5.3 Spin-Off Followed by a Business Combination A spin-off followed by a business combination is possible in the Netherlands. Key requirements include: • legal compliance – the spin-off must fol- low Dutch Civil Code and, if the company is listed, securities rules apply;
• corporate approvals – shareholder and board approvals are needed for both the spin-off and the subsequent merger or acquisition; • tax considerations – Dutch tax law allows for tax-neutral spin-offs if structured properly, which is crucial when a business combination follows; • regulatory approvals – large transactions may require clearance from the Dutch competition authority (the Netherlands Authority for Con- sumers and Markets ( Autoriteit Consument & Markten or ACM)) and/or foreign direct invest- ment (FDI) approvals; and • timing – the sequence should be carefully planned to avoid legal and tax complications. 5.4 Timing and Tax Authority Ruling The timing for a spin-off depends on its struc- ture. If the spin-off is structured as a statuto- ry demerger, the typical timing is at least two months, taking into account preparation time, a statutory waiting period of one month and a limited period for execution. This assumes there is no objection from creditors at the end of the waiting period. If the spin-off is structured as a distribution of subsidiary shares (which is often the case if a business is spun off to existing shareholders), this can be done relatively quickly from a corporate law standpoint (in a matter of weeks). However, if such a spin-off involves the distribution of the subsidiary of a listed company and the subsidiary shares are admitted to list - ing and trading on a stock exchange, this adds a significant period to the timetable, given the required regulatory approval process. Parties would need to obtain a ruling from a tax authority prior to completing a spin-off if not all conditions for a tax-free spin-off at the corporate level are met. In such case, a request should be submitted to the Dutch tax authorities prior to the spin-off. Typically, the Dutch tax authorities
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