Ending a Dutch VAT fiscal unity: how it works

A Dutch VAT fiscal unity ends by operation of law as soon as the three forms of interlinkage (financial, organisational, economic) are no longer met, for example after a share sale. But watch out: joint and several liability under article 43 of the Collection Act 1990 continues until you notify the inspector in writing that the unity has ended. That notification is the step most often missed in practice.

When does a VAT fiscal unity end?

The unity ends as soon as one of the three forms of interlinkage falls away:

• A share sale that pushes financial interlinkage below the 50% threshold.
• A change in management that breaks the overarching leadership between the entities, removing organisational interlinkage.
• Discontinuing mutual activities, removing economic interlinkage.
• Liquidation or bankruptcy of one of the members.

Just as with its formation, no request is needed. The VAT fiscal unity arises and ends by operation of law: the moment interlinkage falls away, the unity ends that same day.

Notify the inspector in writing (article 43 Collection Act 1990)

This is the point to remember. Without a written notification to the inspector, every (former) member remains jointly and severally liable for the VAT debts of the unity, article 43 of the Collection Act 1990. That includes debts that arise after the interlinkage has actually ended, as long as the inspector is not aware the unity has stopped.

In practice: send a letter to the tax office as soon as the change happens, stating the date and reason for termination. Do not wait for the next VAT return or an audit. For the full scope of this liability, see joint and several liability in the VAT fiscal unity.

Consequences after termination

After termination, each member files its own VAT return again under its own VAT number. The joint return of the fiscal unity stops as of the termination date; the return for the period before that date still covers the unity as a whole. Mutual supplies are no longer untaxed: you must invoice them with VAT again, even if the invoicing flow used to be purely administrative. Also review ongoing contracts with third parties naming the fiscal unity as a party, and check the revision periods for capital goods. Those keep running even though the relationships between the entities have changed, and misallocating them after the unity ends can trigger a correction.

Partial separation

If one member leaves the unity, for example through the sale of a single operating company, the rest of the unity continues to exist as long as interlinkage between the remaining members stays intact. The unity as a whole does not need to be dissolved; only the departing member drops out. A partial separation also needs written notification to the inspector, specific to the departing member, stating the date on which interlinkage with that member ended. Without that notification, the departing member also remains jointly and severally liable for the VAT debts of the unity it left.

Difference with the CIT fiscal unity

Ending a Dutch CIT fiscal unity works differently: that happens by request, or automatically once ownership falls below the 95% threshold, with its own deconsolidation consequences such as the 15ai recapture rule. The VAT unity has no comparable recapture rule, but does carry the joint and several liability under article 43 of the Collection Act. The end of one unity does not automatically end the other: a share sale that ends the CIT unity does not have to affect VAT interlinkage, as long as overarching management and the mutual activities stay intact. If your shareholding or management structure changes, check both positions separately, and notify each one separately.

Example

Holding B.V. sells all shares in Werk B.V. on 1 March. Financial interlinkage ends that day by operation of law. The holding company notifies the inspector in writing that same week. Had it not done so, it would have remained jointly and severally liable for VAT debts Werk B.V. incurred after the sale.

Get started

Want to form a VAT fiscal unity, or have your position reassessed after a change in your group? Request a Dutch VAT fiscal unity. Also read the requirements for a Dutch VAT fiscal unity to check whether your group still meets the three forms of interlinkage.