Important judgment on tax classification of financial instrument
On May 17, 2024 the Dutch Supreme Court rendered an important judgment on the tax qualification of a financial instrument that was issued by a company established in France in 2007. It concerned the ‘obligation remboursable en actions’ (hereinafter: ORA). The question was whether the instrument had to be regarded as equity (capital) or debt capital (loan) for the purposes of the Corporate Income Tax Act 1969. Although the dispute focused on the question whether the costs related to the issue of the instrument were allocable to a Dutch permanent establishment of the French company, the Supreme Court judgment potentially has a much broader scope.
The memorandum in response to the report provides answers to many questions, but there are still many points that need further elaboration, especially at the OECD level.
The new treaty will apply at the earliest from January 1, 2024 (but probably only from January 1, 2025). We have summarized some important aspects of the new treaty.
