European court orders Dutch to end disputed corporate tax break

AMSTERDAM (Reuters) – Tax advantages granted by the Netherlands to large multinational corporations breached European rules, the European Court of Justice said on Thursday, nearly 15 years after the European Union said the same structure constituted illegal state aid.

The disputed tax regime was aimed at keeping companies headquartered in the Netherlands and kept the tax rate on their internal financing activities at 5 to 7 percent, compared to the Dutch headline rate of 25 percent.

The tax structure allowed companies to subtract interest received on loans to subsidiaries from the group’s corporate tax bill, as long as all entities involved were based in the Netherlands.

The European Court said this discriminated against Dutch-based multinationals with subsidiaries in other EU countries, as they were not given the same advantage.

The European Commission ordered the Dutch government in 2003 to end the so-called concern financing activities regime, saying it constituted illegal state aid.

But the tax advantage was kept in place in various forms until the end of last year, documents released by the Dutch Finance Ministry earlier this week showed.

The Dutch government said in October last year it would end the regime if ordered to by the European court.

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