“X Shareholder Loan B.V.” and its subsidiaries had been set up in connection with a private equity acquisition structure. In 2011, one of “X Shareholder Loan B.V.”‘s subsidiaries bought the shares of the Dutch holding company. This purchase was partly financed by a loan X bv had obtained from its Luxembourg parent company. The Luxembourg parent company had obtained the the funds by issuing ‘preferred equity certificates’ (PECs) to its shareholders. These shareholders were sub-funds of a private equity fund, none of which held a direct or indirect interest in “X Shareholder Loan B.V.” of more than one-third.
The tax authorities found, that deductibility of the interest paid by “X Shareholder Loan B.V.” to its Luxembourg parent was limited under Section 10a Vpb 1969 Act.
The Court of Appeal upheld the assessment. According to the Court, whether there is an intra-group rerouting does not depend on whether the parties involved are related entities within the meaning of section 10a, i.e. whether they hold an interest of at least one-third. Instead, it should be assessed whether all the entities involved belong to the same group or concern. This does not necessarily require an interest of at least one-third.
No satisfied with the decision “X Shareholder Loan B.V.” filed an appeal with the Supreme Court.
Judgement of the Supreme Court
The Supreme Court declared the appeal well-founded and remanded the case to Court of Appeal for further consideration of the issues that had not addressed by the court in its previous decision.
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