Source: NTFR 2012/2126, pages 7-13
Author(s): Bauco Suvaal

Uncertainty exists in the tax practice, and possibly also in judicial circles if a recent judgment rendered by the District Court in the Hague is anything to go by, about when the shareholder test referred to in Section 20a Corporate Income Tax Act (“CITA”) should be applied. This provision concerns the trade in loss-making entities. The author aims to provide an adequate answer to this question, by referring to the legislative development of Section 20a.

By taking a close look at the text of the ultimate and current Section 20a(1), and outlining the striking difference with the originally proposed wording, but also taking into account the legislative history and the '20a Decree' issued by the Deputy Minister of Finance, the author concludes that the shareholder test, and thereby also Section 20a, should ‘only’ be applied in the year any shareholder change takes place. If, as a result thereof, it becomes clear that Section 20a does not apply, then the losses in respect of the shareholder change can definitely be carried forward.

The author hopes that the Court of Appeals in the Hague will put an end to the increased uncertainty that has arisen in the tax practice as a result of the District Court’s judgment, and that the Court of Appeals will rule in line with the conclusions set out in this article.