Joint and several liability in the Dutch VAT fiscal unity (art. 43 IW)

Every member of a Dutch VAT fiscal unity is jointly and severally liable for the full VAT debt of the entire unity, under article 43 of the Invorderingswet 1990. It does not matter which member actually caused the debt: the Belastingdienst can hold any company within the unity liable for the full amount. This is the most significant drawback of the VAT fiscal unity.

What exactly does the joint and several liability mean?

Once the fiscal unity exists, it counts as a single taxable person for VAT. If a VAT debt arises, for example through an additional assessment or an unpaid return, that debt is a debt of the unity as a whole. Article 43 IW 1990 provides that every part of the unity is jointly and severally liable for that debt. The Belastingdienst does not have to approach the member that caused the debt first; it can seek recovery directly from any other member.

Example: Holding B.V., Werk B.V. and Vastgoed B.V. together form a VAT fiscal unity. Werk B.V. receives an additional assessment of € 80,000 but goes bankrupt before it can pay. The Belastingdienst can recover the full amount from Holding B.V. or Vastgoed B.V., even though they had nothing to do with the underlying transaction.

From when does liability apply, and when does it end?

Liability applies as soon as, and for as long as, a member is part of the fiscal unity. Because the unity arises by operation of law once the financial, organisational and economic interlinkage is met, liability can already exist before the inspector has issued a ruling. The ruling confirms the existence of the unity but does not independently create the liability. Read more about this difference in VAT fiscal unity by operation of law.

Liability ends in principle the moment a member is no longer actually interlinked with the other members, so once the financial, organisational or economic interlinkage falls away. Importantly, this is not automatically visible to the Belastingdienst. Always report the end of the interlinkage or a member's departure to the tax office, so the designation and the liability are formally updated. Without a notification, you risk the Belastingdienst continuing to treat you as part of the unity for longer than is actually the case.

Why is this the biggest drawback of the VAT fiscal unity?

Unlike many other tax choices, you cannot exclude the joint and several liability through an internal agreement between the members. A mutual indemnity or contribution arrangement at most settles how the loss is divided after the Belastingdienst has recovered the debt, but it does not change the Belastingdienst's right to hold any member liable for the full amount. For groups with a financially weaker entity, for example a real estate BV with limited liquidity alongside a profitable operating company, this is a real risk to weigh against the administrative benefits of the fiscal unity beforehand.

How do you limit exposure in practice?

• Report changes promptly. If the group structure changes, for example through the sale of a subsidiary or the loss of joint management, notify the Belastingdienst immediately. The sooner the interlinkage is formally ended, the shorter the period of liability for future debts.
• Keep the VAT position of each member transparent. Monitor per member whether returns are filed on time and correctly, and whether VAT is actually paid. The sooner you spot an issue, the lower the chance of an additional assessment that affects the whole unity.
• Consider internal contribution agreements. These do not settle liability toward the Belastingdienst, but they do govern how the burden is shared internally if a member is actually held liable for a debt caused by another member.
• Weigh the unity against standalone status. If the administrative simplification is limited and a member is financially vulnerable, it can sometimes be wiser to actively avoid or end the interlinkage, for example by breaking the organisational interlinkage.

How does this relate to the ruling?

The fiscal unity ruling records that the inspector recognises the interlinkage, and it applies going forward. It also settles the designation of the unity: who files on behalf of the unity and in whose name the assessments are issued. The liability under article 43 IW 1990 is separate from that and follows from the existence of the unity itself, not from the ruling. Even without a ruling, that is, during the period the unity already exists by operation of law but has not yet been formally established, joint and several liability already applies.

Frequently asked questions

Can I exclude the joint and several liability by contract?

No, not toward the Belastingdienst. An internal agreement between the members can settle how the loss is divided internally, but the Belastingdienst can still hold any member liable for the full debt.

Do I remain liable for debts that arose after I left?

No, for debts that arise after the interlinkage has actually ended and this has also been formally reported, you are in principle no longer liable. For debts from the period you were a member, liability generally continues.

Does liability apply even if I personally never made a mistake?

Yes. The joint and several liability is not linked to fault or culpability of the member being held liable. It follows automatically from membership of the fiscal unity.

Next step

Want to know whether your group meets the interlinkage conditions, and how to document this risk in the request letter? First read Interlinkage in the VAT fiscal unity and VAT fiscal unity by operation of law. Then use our tool to prepare the request letter. Unsure whether you need CIT or VAT? Read CIT fiscal unity vs VAT fiscal unity: what is the difference?.