Dutch anti-base-erosion rule compatibility with EU law after Lexel judgment
Charlotte Tolman and Michael Molenaars review the CJEU’s Lexel judgment for its potential effect on the Dutch anti-base-erosion rule and, more broadly, if it signals a change in the Court’s approach to evaluating whether a transaction is abusive.
Recently, the Dutch Supreme Court referred preliminary questions to the Court of Justice of the European Union on whether the application of the Dutch anti-base-erosion rule is compatible with EU law.
The questions followed the CJEU’s 2021 judgment in Lexel and the Court of the European Free Trade Association’s recent decision in PRA Group Europe AS, from which it may be derived that loans that are based on arm’s-length terms cannot be considered wholly artificial and thus are not abusive.
The effect of the Lexel judgment may be broad. It may affect the anti-abuse interpretation of the European parent-subsidiary directive and anti-tax-avoidance directives and the proposed Council Directive ATAD3. It may also affect the domestic abuse doctrines and even the OECD’s proposed pillar 2 blueprint. The responses to the preliminary questions are expected to provide much-needed clarity on the interpretation of not only the Dutch anti-base-erosion rule, but also other member states’ interest deduction limitations.
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Authors: Charlotte Tolman and Michael Molenaars
Source: Tax Notes International, volume 108, number 6
Publication: 7 November 2022
