On 11 September 2026, the Dutch Supreme Court rendered its long-awaited judgment on the scope of the Dutch anti-abuse rule for loss utilisation. The judgment confirms that also unrealised losses may be restricted following a substantial change in ownership. This will have particularly impact on Dutch taxpayers involved in M&A transactions, restructurings and real estate investments.
Although the judgment provides clarity on the principal issue, it also creates significant administrative burdens and uncertainties. Taxpayers may now need to identify, value and monitor unrealised losses at the time of a qualifying ownership change, even where those losses have not yet been formally recognised for tax purposes. In addition, various technical questions with practical impact remain unresolved, which leads to uncertainty for taxpayers.
Background of the case
The rule for loss utilisation under article 20a of the Dutch Corporate Income Tax Act 1969 (Loss Restriction Rule) is intended to prevent the trading of loss companies by restricting the utilisation of losses following a substantial change (i.e., 30% or more) in the ultimate ownership of a corporate taxpayer.
The case concerned a company holding a portfolio of real estate assets. At the time of a qualifying ownership change, the fair market value of certain properties was lower than their tax book value. These unrealised losses were realised several years later upon a transfer of these properties. The Amsterdam Court of Appeal and the Advocate General held the view that unrealised losses should be taken into account for the purpose of the Loss Restriction Rule.
According to the Supreme Court, the legislative history provides sufficient guidance that unrealised losses also qualify as losses within the scope of the Loss Restriction Rule. The Supreme Court also held that the introduction of the loss determination decision (verliesverrekeningsbeschikking) did not alter the application of the Loss Restriction Rule to unrealised losses. However, the Supreme Court made clear that it would have been appropriate for the legislator to have provided specific rules on the identification and treatment of unrealised losses present at the time of the ownership change.
The judgment does not affect the statutory exceptions to the Loss Restriction Rule, e.g., the business continuity exception. Taxpayers should continue to assess, based on the facts and circumstances of the relevant transaction, whether an exception may be available.
What does this mean for taxpayers?
While the Supreme Court has clarified the principal issue, the ruling does not provide any further guidance on the practical consequences. Hence, several questions remain unresolved. These points are expected to be relevant in tax due diligence, transaction structuring, valuation work and future tax return positions. The outcome is particularly relevant for real estate structures, asset-intensive businesses, distressed M&A transactions and companies with significant unrealised gains or losses. Taxpayers may need to retain valuation evidence and monitor asset values throughout the investment lifecycle to preserve their loss utilisation position.
In particular, taxpayers should consider the following outstanding points:
Oldest loss year
A key technical element of the Loss Restriction Rule is the comparison between the oldest loss year and the year of the ownership change. As unrealised losses fall within scope, determining the oldest loss year may require taxpayers to reconstruct historical valuations and monitor unrealised gains and losses over extended periods.
Net basis approach versus asset-by-asset approach
Another important issue is whether unrealised gains and unrealised losses should be assessed separately on an asset-by-asset basis or on a net basis approach when determining whether unrealised losses are present. The approach adopted could materially affect both the application of the Loss Restriction Rule and the amount of losses potentially restricted.
Depreciation and valuation adjustments
Where an asset contains an unrealised loss at the time of the ownership change, uncertainty remains as to the tax treatment of subsequent depreciation, including whether depreciation may continue on the basis of the historical tax book value or whether the tax basis should be adjusted to the lower fair market value at the time of the ownership change. Furthermore, it remains uncertain whether a subsequent increase in the fair market value of the asset could trigger a mandatory taxable revaluation.
Interaction with Dutch sound business practice
Further clarification may be needed with respect to Dutch sound business practice. It remains to be seen to which extent capitalised costs, provisions and other balance sheet items also need to be taken into account when determining whether unrealised losses exist.
Burden of proof
Another unresolved issue is the allocation of the burden of proof. While the Dutch tax authorities generally bear the initial burden of demonstrating that the Loss Restriction Rule applies, it remains unclear how this works for unrealised losses.
Wider implications
The Supreme Court’s reasoning may also extend beyond the Loss Restriction Rule. As a result, it may influence other areas of Dutch corporate income tax where loss concepts play a role.
Conclusion
With this judgment, the Dutch Supreme Court has provided important clarity on the treatment of unrealised losses following a substantial change in ownership. At the same time, the decision is likely to create administrative burdens and practical uncertainty. The judgment underscores the importance of timely valuation work and robust documentation in transactions involving companies with unrealised losses.
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.
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