Tax free transfer

Additional condition tax-free transfer of assets for foreign business owner

In a case before the Supreme Court regarding the tax-free transfer of assets from a business which is exempt from corporate income tax to a company, the attorney-general has made their conclusion.

Tax-free transfer
For the tax-free transfer of assets from a sole tradership or partnership there are conditions set by the tax authorities. This is to ensure that the tax office does not lose their tax entitlement. For a foreigner that would like to transfer their Dutch sole tradership/partnership there is an extra condition (the eighth condition). This holds that it is possible for the business to be transferred tax-free but in the year of transfer the tax authorities will increase the income tax assessment with the transfer amount. They will allow extra time for payment of this portion of the assessment.

Case
In this court case there is a foreign business owner who wants to transfer his business into a company, and who believes that the eighth condition is discriminatory.

Conclusion attorney-general
The attorney-general believes that a foreign business owner who transfers their income tax-liable business into a company should be treated as a domestic business owner who emigrated after the transfer. For the application of the tax-free transfer domestic and foreign taxpayers are in a comparable situation.

The increasing of the assessment and the extra conditions for a tax-free transfer which only apply to foreign taxpayers can be considered indirect discrimination on the grounds of nationality.

According to the attorney-general the Supreme Court can let the legal consequences of the decision stand, but may not allow the transfer of the actual management of the company to lead to the end of the tax payment deferral . In addition, after 10 years the outstanding tax amount which was deferred must be waived.