March 17, 2020
Adam Blakemore comments on the Netherland’s new 21 percent value-added tax on collateralized loan obligations that are composed of Dutch-domiciled special purpose vehicles.
An excerpt from “Dutch Tell European Debt Security Issuers About New VAT Hit,” Law360, March 17, 2020:
Adam Blakemore, a tax lawyer with Cadwalader Wickersham & Taft LLP, said in a blog post that the Dutch authority’s previous interpretation of how VAT affected CLOs tied to special purpose vehicles “was fairly stable” until a December 2015 ruling from the European Court of Justice. In State Secretary for Finance v. Fiscale Eenheid X NV, the European Union’s highest court said the Netherlands' VAT exemption for investment management services could apply to funds constituting undertakings for collective investment in transferable securities, especially if the funds were subject to “specific state supervision” under an EU country's domestic law.
“Arrangers, managers, and both senior and subordinated investors in Dutch CLO warehouses and CLO term deal transactions will need to consider how the actions of the Dutch tax authorities affect those deals,” Blakemore wrote.
Restructuring of Dutch SPVs is likely to follow, he explained, given that issuers have various options: resetting the deals, making substitutions or modifications, or moving the Dutch issuer itself to a different jurisdiction.