4 Dec 2018

Standard of value for Dutch tax valuations

To play the game you must know the rules.  Take a simple deck of cards.  There are fifty-two different cards in a standard playing deck and an endless number of games that you can play with those cards. It is essential to know if you are playing poker or blackjack or war.  While the decks of cards are all the same, the rules are entirely different, your goals are different, and playing by the wrong set of rules will lose you the game.

Standard of value is the set of rules and guiding principles applied to a valuation.  Similar to a deck of playing cards, you may think that the financial values and the data can be taken at face value.  Depending on the purpose of the valuation, the standard of value applied can be different and can have a sometime substantial impact on valuation outcomes. The guidelines for Dutch tax purposes can vary from other valuation purposes.  Some guidance is written and some is not.  Following the wrong standard of value can lead to incorrect reporting and even tax penalties.

The Dutch tax guidance suggests that the standard of value for equity investments is ‘waarde in het economisch verkeer’. This usually equates to a sales price, however sometimes it can be difficult to determine the sales price of an investment, for example when there is no market for the investment. In this case, the value should be estimated. The Dutch tax authorities prescribe the following method for determining ‘waarde in het economisch verkeer’ on the Belastingdienst website:

“U gaat uit van de waarde in het economisch verkeer. Meestal is die gelijk aan de verkoopwaarde. Maar soms is het moeilijk om de verkoopwaarde van (een deel van) uw bezittingen te bepalen, bijvoorbeeld omdat er geen ‘markt’ voor is. U moet dan de waarde schatten. Soms is de wijze van waarde bepalen voorgeschreven.”

Jurisprudence provides a more detailed definition of the standard of value. With reference to a court ruling involving the Dutch tax authorities dated 12 April 2007 (ECLI: NL: RBSGR: 2007:BB5688), the economic value equates to the sales price of the highest bidder under the most favorable conditions and assuming best preparation. This price depends on the extent to which profitability can be traced back to personal qualities of the company’s owner and the period in which the purchase price can be earned back while accounting for reasonable compensation for labor. A reasonable yield on invested capital should be achievable.

“De waarde in het economische verkeer is de prijs die, bij aanbieding ten verkoop, onder de meest gunstige omstandigheden en na de beste voorbereiding, door de hoogst biedende voor de onderneming zou worden betaald. Deze prijs is afhankelijk van de winstgevendheid van het bedrijf, de mate waarin deze winstgevendheid is terug te voeren op de persoonlijke kwaliteiten van de ondernemer en de termijn waarbinnen de betaalde koopprijs, rekening houdend met een redelijke arbeidsbeloning en rente over het geïnvesteerde vermogen, kan worden terugverdiend.”

While the aforementioned guidance suggests using the highest possible value, all assumptions and approaches must be realistic and reasonable.  Not all shares have the same capacity for sale.  It cannot be assumed that restricted shares could be sold in every situation; sale may be prohibited within a specific window of time.  Another example would be non-voting equity certificates.  It might not be reasonable to assume that a competing company would be interested in buying non-voting certificates if looking to gain control of a company and effectuate major corporate or financial decisions because non-voting certificates do not afford such rights. When reviewing a filing, the Dutch tax authorities specifically check for consistency between assumptions and clear explanations for the approaches and methods taken to reach the final values.

AN Valuations is able to navigate these seemingly complicated standards, ensuring correct business valuation for any given purpose.  We are experts in Dutch tax valuations and our reports address and support all assumptions made to reach our results.  AN Valuations is dedicated to providing our clients with well thought out solutions, tailored to their business needs.

About AN Valuations

Clients around the world trust AN Valuations for business valuation and fixed asset appraisal services. We help stakeholders in a broad range of industries with company valuations ranging from micro-cap to large-cap. Our solutions are state-of-the-art, knowledge-rich, and practical.


For more information regarding business valuations for Dutch tax purposes or other services provided by AN Valuations, do not hesitate to contact Andrew Pike at or at +31 70 221 0058.