Eveline van Niekerk

  Faculty of Law | Bachelor Tax Law

The liquidation loss regime under Pillar 2: an empty shell or still effective?

Eveline's elevator pitch
One of the discrepancies between the GloBE base and the domestic corporate income tax base concerns the Dutch liquidation loss regime. This regime plays a significant role for many companies within the scope of Pillar 2, as it enables them to retain the loss it suffers due to the liquidation of their subsidiary. However, since the Pillar 2 computation does not recognize this loss item in the net qualifying income or loss, the effective tax rate is correspondingly reduced. This may result in an effective tax rate falling below the 15% minimum, thereby triggering a top-up tax. Consequently, although the liquidation loss regime was designed as a relief mechanism for companies, it may, in practice, produce adverse effects. In this context, the liquidation loss regime has effectively evolved from an instrument of relief into a potential source of risk for companies.