M&A Tax · Buy-and-Build
Keeping execution fast and predictable - from platform acquisition to exit.
For Investors · CFOs · Founders
"A buy-and-build only works if you can keep moving. Tax is rarely the headline issue - but it often determines cash outcomes, shapes the attractiveness of roll-over investments, and can slow the next add-on if early choices were not designed to scale."
In the Netherlands, early decisions around the holding structure, withholding tax exposure, interest deductibility, transaction costs, roll-over structuring and management incentives can either create a repeatable playbook - or recurring rework. This roadmap highlights eight tax themes to pressure-test early.
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Eight steps that determine whether your buy-and-build creates a repeatable tax playbook - or recurring rework.
| Step | Theme | Key Question |
|---|---|---|
| Step 1 | Platform & holding structure | Will the participation exemption still work as the group evolves? |
| Step 2 | Tax due diligence | Which risks actually hit cash? |
| Step 3 | Tax in the SPA | Who carries which risk - and is it priced? |
| Step 4 | Transaction costs | What is deductible - and is the VAT position documented? |
| Step 5 | Dividend withholding tax | Where are the pinch points in the intended cash flow route? |
| Step 6 | Interest deductibility | Does earnings stripping hold up as the group scales? |
| Step 7 | Roll-over & MIPs | Do the incentives create genuine investment risk? |
| Step 8 | The Build: repeat the playbook | Does the next add-on get easier or harder? |
A buy-and-build is not a single transaction - it is a repeatable acquisition programme. The platform acquisition and the initial holding structure set the route for everything that follows: roll-over investments, future dividends, refinancing proceeds and exit flows all run through this architecture. Suboptimal choices made here create friction that compounds with every subsequent add-on.
In the Netherlands, the participation exemption is a core building block. If the conditions are met, dividends and capital gains on qualifying subsidiaries can generally be received at Dutch holding level free from Dutch corporate income tax (currently up to 25.8%). For buy-and-build strategies, this exemption also determines whether profits can be upstreamed without additional CIT leakage and whether the structure can offer an attractive entry point for Dutch roll-over investors.
The practical challenge is that the group's perimeter changes with every add-on. The structure must therefore not only work for the platform, but remain fit for purpose as the group scales - including when new jurisdictions, new investor profiles or new cash flow routes are added.
Key question: Is your holding template designed to support Dutch participation exemption treatment across the group - not just at platform level, but also for Dutch roll-over investors in the structure?
Tax due diligence on the platform acquisition is where the theoretical structure meets operational reality. The objective is not to produce a comprehensive catalogue of every possible tax issue - it is to produce a short, action-oriented list of items that either drive real cash impact or create friction after closing.
The focus areas that typically matter most are: corporate income tax exposures, VAT positions, payroll tax risks, uncertain tax positions and expected one-off cash tax payments. The output should be directly actionable - mapped to SPA provisions, pricing mechanics and post-closing integration steps.
Key question: Do your DD findings translate into a clear, prioritised list of deal-breakers, SPA items and post-closing risks - rather than a long report that nobody acts on?
Tax due diligence only has value if the findings are properly embedded in the SPA. Ambiguity in the tax provisions is a recurring source of post-closing disputes - and in a buy-and-build, it creates inconsistency across the programme if each deal is handled differently.
The practical decisions to make are: what sits in the tax warranty schedule, what requires a specific tax indemnity, what should be addressed through pre-closing covenants, and how disclosure and limitation periods are structured. It also means aligning the tax risk allocation with the pricing mechanics - for example locked box versus completion accounts.
Key question: Does the SPA tax package accurately reflect who carries each risk identified in due diligence - and is it consistent with how similar items will be handled in future add-ons?
Transaction costs are another area where early choices affect cash. From a Dutch tax perspective, not all transaction costs are treated the same. Broadly, costs that are directly linked to acquiring or disposing of a participation are often treated as not deductible acquisition or disposal costs for Dutch corporate income tax purposes (and may effectively be embedded in the participation), whereas costs that relate to the financing of the acquisition or to the day to day operations of the business are more likely to be deductible in the ordinary course (subject, in the case of financing, to applicable limitations). The difference often turns on what the cost relates to in substance and how it is documented (for example, acquisition advisory fees versus debt arrangement fees). For buy and build programmes, a consistent approach to classification, invoicing and cost allocation early on can avoid recurring discussions and protect the cash tax position across multiple deals.
Also, the VAT treatment of the transaction costs is very relevant and has a direct cash impact, it can also be influenced with a proper structuring and documenting of intentions to perform VAT taxable activities.
Key question: Are transaction costs consistently classified across the programme, and is the VAT recovery position documented before costs are incurred - not after the deal closes?
Withholding tax is one of the most common quiet value drivers in Dutch buy and build structures, because it sits directly on cash distributions. In the Netherlands, 15% dividend withholding tax may apply when profits move up the chain. Whether an exemption applies depends on the facts and the structure and cash flow route, for example treaty access and, in group contexts, whether the conditions for a Dutch dividend withholding tax exemption are met.
Two practical concepts often determine whether a withholding tax position is robust. First, beneficial ownership: who is entitled to the income in substance, and who bears the economic risk. Second, anti abuse: whether intermediate entities and the intended flow of funds have a genuine business rationale and sufficient presence to support the position taken. In addition, the Netherlands has a conditional withholding tax regime that can apply in specific situations, particularly where payments (including dividends) are made to low tax jurisdictions or where structures are regarded as abusive. To keep this practical, it helps to identify likely withholding tax pinch points at an early stage. That allows you to choose routes and build documentation that fits the investor base and the expected exit, rather than having to redesign the route under time pressure when a refinancing or sale process starts.
Key question: Have you mapped the dividend WHT exposure for your full investor base and intended exit route - and is the beneficial ownership and anti-abuse position documented?
Financing is often where buy and build plans start to drift. Acquisition debt that works at platform level can become constrained as the perimeter changes, EBITDA moves and leverage is reset through add ons and refinancings. In the Netherlands, a key constraint is the interest limitation regime (often referred to as earnings stripping). At a high level, net interest is generally deductible only up to the higher of 1 million euros and 24.5% of tax EBITDA. As the group grows, EBITDA and net interest can move in different directions, so deductibility can tighten even if the initial platform model looked fine. Net interest that is not deductible is generally not lost immediately; it can typically be carried forward, but it can still change the cash tax profile and become relevant in refinancing discussions.
Illustrative only. Deductible cap = higher of €1M and 24.5% of tax EBITDA per fiscal unity / taxpayer.
Where interest is restricted at the level of a Dutch BidCo, one practical lever is to align the tax perimeter with the profit perimeter. Once multiple profitable Dutch add ons sit under the platform, forming a Dutch corporate income tax fiscal unity can allow profits and net interest to be pooled (while the earnings stripping cap continues to apply at fiscal unity or taxpayer level), which may improve the ability to set off acquisition interest against operating profits. In some buy and build programmes, groups also consider using separate fiscal unities for different clusters of add ons over time, rather than one ever expanding unity, so that EBITDA capacity (and, where applicable, the 1 million euros de minimis threshold) can be utilised more effectively. This is not a mechanical fix: a corporate income tax fiscal unity has entry conditions and consequences (including broader tax side effects), and anti-fragmentation rules can restrict the ability to multiply threshold capacity within a group. It should therefore be modelled alongside the acquisition and refinancing roadmap.
| Tool | How it helps | Watch out for |
|---|---|---|
| Dutch CIT fiscal unity | Pools profits and net interest of Dutch group companies - allowing acquisition interest to be set off against operating profits of profitable add-ons. | Entry conditions; broader CIT side effects including joint and several liability. |
| Separate fiscal unities per cluster | More effective use of EBITDA capacity and the €1M de minimis threshold across different parts of the group. | Anti-fragmentation rules may restrict the ability to multiply threshold capacity within the same group in the future. |
⚠ Anti-fragmentation rules restrict the ability to multiply the €1M threshold across fiscal unities within the same group. This must be modelled alongside the acquisition and refinancing roadmap - it is not a mechanical fix.
Key question: Is interest deductibility modelled dynamically - including the fiscal unity perimeter - as each add-on is integrated and leverage is reset?
Management arrangements deserve the same rigorous structuring as the holding architecture - and they must be designed before signing, not retrofitted after the deal closes. Founders and key managers typically sell a portion of their shares at closing and reinvest into the new group (a roll-over). Separately, as the group scales, management incentive plans (MIPs) are used to align leadership with value creation - typically through sweet equity or instruments that share in upside, particularly at exit.
The Dutch tax treatment of both instruments depends heavily on substance and documentation. For roll-overs, the key question is whether the reinvestment creates genuine economic risk - or whether it can be recharacterised as deferred consideration. For MIPs, the entry price is critical: an instrument acquired below fair value risks being treated as employment income subject to wage tax at entry.
Key question: Do the roll-over and MIP structures work from a tax perspective - and is the documentation consistent with that narrative from day one?
Once add-on acquisitions begin, repetition becomes your primary efficiency driver - but only if you are repeating the right pattern. Each add-on changes the group's footprint, cash flows and financing, and with that, its tax profile. The objective of the build phase is to make each successive deal faster and more predictable than the last - not to reinvent the wheel under time pressure with each new target.
A proportionate DD scope avoids over-engineering each add-on individually while still identifying the items that genuinely matter. A consistent SPA framework built on the platform template means negotiations are faster and the tax risk allocation is predictable. Disciplined integration choices - including fiscal unity entry, VAT grouping and intercompany pricing - ensure that the earnings stripping and WHT positions established at platform level remain intact as the group grows.
Key question: Is your tax model updated automatically after each add-on closes - and does the next deal get easier or harder?
Our M&A tax team supports investors, CFOs and founders across the full buy-and-build cycle - from platform acquisition through each add-on to exit.
Karel Pellemans
Partner
Karel specialises in Dutch corporate income tax and international tax law. He advises private equity firms, corporates and institutional investors on transactions, cross-border structuring, due diligence, management participation structures and post-deal integration.
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Matthijs Busscher
Associate
Matthijs is a member of the M&A tax team, advising on buy-and-build transactions, tax due diligence, acquisition structuring and management incentive plans. He supports clients across the full transaction lifecycle with a focus on practical, deal-ready tax advice.
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