Dutch Supreme Court opens up new possibilities to deduct costs related to the sale of participations

Under the Dutch CIT rules, profits and capital gains related to participations are exempt for tax purposes. This also limits the deductibility of costs that directly relate to the acquisition or sale of such a participation. The exact determination of what costs are related to an acquisition is therefore regularly subject to discussion with the Dutch tax authorities. The Dutch Supreme Court has now offered more clarity on this matter in favour of Dutch taxpayers.

The main takeaway is that costs directly resulting from the sale or acquisition of a participation may in some cases be deductible, namely in situations where do not directly contribute to the sale or acquisition.


The owner of a business which had been sold wanted to thank his former employees and therefore paid out bonuses to all employees to reward them for the services they had provided. The bonus was given to all employees. The seller wanted to deduct the costs of these bonus payments. The Dutch tax authorities did not agree, pointing out that the bonus would not have been paid out if the company had not been sold. In their view, this was a direct causal link and thus non-deductible for CIT purposes.

The lower court initially ruled in favour of the tax inspector, who claimed that the costs qualified as sales costs under the participation exemption. The lower court agreed with the Dutch tax authorities and reiterated that the bonusses were a direct consequence of the sale, and as such non-deductible.

In its decision, the Supreme Court further specified, however, that costs are deductible in circumstances where they do not contribute in any way to the realisation of the sale. The payment of the bonuses in this case did not contribute to a higher purchase price. This is because the bonusses were paid to all employees even those not involved in the process. Such costs should be neither useful nor necessary for the sale in order to qualify as deductible costs. This means that costs that “in no way contribute” to the realisation of the sale cannot be considered acquisition or sale costs, and are therefore deductible.


In essence, the Supreme Court has added a further criteria to determine whether costs related to a sale or purchase of a participation can be deducted. This creates new possibilities to deduct costs in relation to future or past sales and acquisitions by Dutch entities. We now know farewell bonusses paid to employees that are not involved in the sale of a participation are deductible. This case may also open up the possibility to deduct other types of, previously non-deductible, costs.