This is apparent from a recently made public decision of the Noord-Holland District Court in Haarlem.
Collision
The Dutch supermarket group Koninklijke Ahold completed the acquisition of Belgian peer Delhaize in mid-2016. Subsequently, the company came into conflict with the Dutch tax authorities about the correct accounting treatment of this acquisition.
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According to Ahold Delhaize the merger had created an accounting item that had to be written off over ten years. That depreciation would reduce profits, reducing the company’s corporate income tax liability.
Tax benefit 200 million
A recently made public decision shows that the tax authorities do not agree with this, and that the depreciation was not taken into account in the corporate tax assessment for 2016. According to the ruling, this concerns a reduction of the taxable amount of more than 38 million euros that year.
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At the corporate tax rate of 25 percent, that saves Ahold almost 10 million euros in the six months after the acquisition in 2016 alone. Over the total depreciation period of 10 years, the tax benefit would amount to roughly 200 million euros.
To the judge
After the tax authorities rejected Ahold’s objection to the tax bill, the supermarket company went to court.
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However, the Noord-Holland court ruled in favor of the tax authorities last month and ruled that there is no item on which Ahold can write off. “The 2016 corporate income tax assessment is not too high”, according to the pronounciation† “The appeal must be dismissed as unfounded.”
Second tax setback
It is the second time in a short time that Ahold Delhaize has had to deal with a tax setback. In February, the supermarket company had to pay the Belgian tax authorities an additional assessment of 382 million euros pay following a disagreement over the accounting treatment of a transaction with Delhaize’s US stores.
The supermarket company paid the Belgian tax, but wants to try to get that money back.
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Lawyer Aldo Mariani of KPMG Meijburg, who represented the retail group in the case against the Dutch tax authorities, refers to Ahold Delhaize for an explanation.
A spokesperson for the supermarket giant confirms the discussion with the tax authorities (see box). She indicates that the group may still appeal against the judge’s ruling. “Ahold Delhaize is carefully considering the various legal alternatives to this case.”
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Response Ahold Delhaize
“In the 2016 cross-border merger of equals between Ahold and Delhaize, Ahold has satisfied so-called merger goodwill, related to synergy benefits realized at both entities, Ahold and Delhaize. Current laws and regulations allow for multiple interpretations of the tax treatment of this goodwill. In order to obtain clarity about this, the parties have decided to submit the case to the court. It is important to note that Ahold Delhaize has already paid and booked its taxes in accordance with the position of the Dutch Tax Authorities.”
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