A recent Dutch court ruling provides clarity on when loans between related companies can be written off for tax purposes – crucial information for entrepreneurs with multiple business entities.
Key Points for Business Owners:
The Burden of Proof: The Dutch Tax Authority must prove a loan is “non-business” (onzakelijk), not the other way around.
Form vs. Substance: The absence of written loan terms, collateral, or repayment schedules doesn’t automatically make a loan “non-business” for tax purposes.
The Critical Test: Could an independent third party have provided the loan (perhaps with higher interest to account for risk)?
Sufficient Collateral: If the borrowing company has sufficient assets to cover the loan value, this strongly suggests the loan is “business-related.”
Business Implications:
If you provide loans between your companies, ensure the borrowing entity has adequate assets to support loan repayment. Document your business rationale, even if formal loan agreements aren’t in place.
Should your company need to write off an intercompany loan, you may be able to deduct the loss against your taxable profits – despite informal loan arrangements.
In any case, we always recommend you to document your intercompany loans well, for example in a current-account agreement (rekeningcourantovereenkomst).
Case reference: ECLI:NL:RBGEL:2024:7864, Gelderland Court, November 2024
