Corporate restructuring actions needed before 1 January 2021

Within a cross-border corporate investment and business structure there are always good reasons to examine regularly its sustainability and efficiency in a continuously and demanding changing business and regulatory landscape. Such analysis should be performed timely in order to allow an orderly and timely implementation of any possible changes under applicable laws to such an investment and business structure.

This note elaborates on specific corporate restructuring actions that may be needed following changes to the tax treaty between the Kingdom of the Netherlands and the Grand Duchy of Luxembourg effective as from 1 January 2021 with the principal purpose test becoming applicable also to income items that classify as capital gain from a Netherlands domestic tax perspective.

In order for a corporate investment and business structure to be ready for these changes there may be a need to simplify a corporate structure by carrying out a restructuring in the form for example of a cross border legal merger or to implement a cross border legal conversion from the Netherlands to the Grand Duchy of Luxembourg or vice versa.

Both Luxembourg and Dutch corporate law require in such situations specific creditor opposition periods to be observed, however there are some differences. The opposition period both in the Netherlands and Grand Duchy of Luxembourg in case of an outbound cross border legal merger is one month. With respect to an outbound cross border legal conversion the Netherlands applies a two months opposition period. No opposition period applies however in the Grand Duchy of Luxembourg, because from a legal perspective such restructuring action is treated as an ordinary outbound migration for which no specific requirements apply.

In addition to these statutory opposition periods usually also one or two months should be reserved for preparing all relevant legal and financial documentation (such as interim financial statements) necessary for the corporate restructuring action. From a Luxembourg perspective it is noted that the required assistance of a notary should be booked in advance with less availability of the notary during the holiday season.  

In order to avoid a delay due to the usual year-end rush of business restructurings and with a little bit more than only 3 months until 1 January 2021, it is advisable to accelerate the decision process in case of a corporate restructuring action. If you have any questions please do not hesitate to approach your usual contact at BUREN.