VAT fiscal unity by operation of law: ruling and liability

The VAT fiscal unity works differently from the CIT fiscal unity. The VAT unity arises by operation of law once the entrepreneurs are interlinked. You do not need permission for that. The inspector's ruling only records what already exists.

By operation of law: the unity exists when the interlinkage exists

Once the three forms of interlinkage (financial, organisational and economic) are cumulatively present, the entrepreneurs form a single VAT taxable person. That holds even without a ruling. The practical effects, such as untaxed supplies between members and one combined return, follow from that interlinkage, not from a prior approval.

The ruling gives certainty and works going forward

You ask the inspector for a ruling to obtain certainty about the existence, the designation and the liability of the unity. Important: the ruling has no retroactive effect. It works going forward, usually from the first day of the month after the date of the ruling. This is a fundamental difference from the CIT unity, where you choose a consolidation date and file the request within three months.

What about past periods?

Because the unity exists by operation of law, it may already have existed over periods before the ruling. That affects returns already filed: supplies between members that were wrongly charged with VAT at the time may have been processed incorrectly. Assess this carefully and align it with the Dutch Tax Authority where needed.

Joint and several liability (article 43 Collection Act 1990)

Once the fiscal unity is established by ruling, the parts are jointly and severally liable for the VAT owed by the unity (article 43 of the Collection Act 1990). Each member can therefore be held liable for the full VAT debt of the unity. Take this into account when a new member joins.

Report changes

Report accession, partial dissolution or termination of the unity to the tax office. That matters for the designation and the liability. As long as the interlinkage exists, the unity in principle continues; if it falls away, the unity ends.

Example

Holding B.V. and Werk B.V. are financially, organisationally and economically interlinked. The fiscal unity therefore exists by operation of law. With a request letter they ask the inspector to record this by ruling, so they have certainty and the unity is on record. The ruling works from the future start date.

Get started

Want to assess the interlinkage and prepare the request letter? Use our tool. Also read Interlinkage in the VAT fiscal unity and How to request a VAT fiscal unity.