Demonstrable Intention to Reinvest (HIR)

A recent ruling by the District Court of Gelderland highlights the importance of having a demonstrable intention to reinvest when forming a Reinvestment Reserve (HIR). Without objective evidence, an HIR cannot be formed.

The Case

In 2018, a company sold a property with a book value of zero for €290,000 and allocated the full gain to an HIR.

The Dutch Tax Authorities later ruled that no reinvestment intention existed, correcting the taxable profit for 2018.

Positions and Court Judgment

The court held that a reinvestment intention must be plausible on the balance sheet date and supported by objective evidence.

Reinvestment Intention May Become Realistic Later

The Supreme Court has ruled that an HIR may still be formed if the reinvestment intention becomes realistic within three years.

Practical Tips for Entrepreneurs

• Document intentions with written evidence.
• Retain bids, emails, and correspondence.
• Ensure reinvestment within three years is realistic.