The European Commission has formally requested the Netherlands and some other Member States to change their tax rules, which impose an immediate exit tax when companies transfer their seat or assets to another Member State. The Commission considers these provisions to be incompatible with the freedom of establishment. The Commission announced this in a press release on March 18, 2010.

The request has taken the form of a reasoned opinion, which is the second step of the infringement procedure that the Commission initiated against Belgium, Denmark, and the Netherlands. The following Dutch rules are at issue:

Individual income tax:

·         Taxation on assets of a business conducted in the Netherlands, which are transferred to a business abroad, and the entrepreneur emigrates simultaneously or later from the Netherlands;

·         Exit tax if a business is transferred abroad and the entrepreneur ceases to derive income from business in the Netherlands.

Corporate income tax:

·         Taxation on assets transferred to a business abroad and conducted by a company that also transfers its place of management abroad;

·         Exit tax on, inter alia, the transfer of assets after the place of management of a company had already been transferred abroad. 

The Commission’s opinion is based on the EU Treaty as interpreted by the Court of Justice of the European Union in the Lasteyrie du Saillant case (March 11, 2004) and the N case (September 7, 2006), as well as on the Commission’s statement on exit taxation of December 2006. Immediate taxation of accrued but unrealized capital gains at the moment of exit is therefore not allowed if there would be no similar taxation in comparable domestic situations. It follows from the case law that the Member States must defer the collection of their taxes until the moment that capital gains are actually realized.

The Commission had already referred Spain and Portugal to the Court of Justice for similar exit tax rules. The Commission has closed a similar case against Sweden, as this Member State has, in the meantime, complied with the Commission’s request.

If the Netherlands does not give a satisfactory reaction to the request, the Commission may decide to refer the case to the Court of Justice of the European Union.