Interlinkage in the VAT fiscal unity: financial, organisational and economic

A VAT fiscal unity only arises if the entrepreneurs are financially, organisationally and economically interlinked (article 7(4) of the Dutch VAT Act 1968). The three conditions are cumulative: if one is missing, there is no fiscal unity. We explain each below.

1. Financial interlinkage

Financial interlinkage is met if more than 50% of the shares, including the control over them, of each enterprise is directly or indirectly in the same hands. So it is more than half, not the 95% ownership requirement of the CIT fiscal unity. That difference is often confused.

For a foundation or association without share capital, financial interlinkage follows not from shares but from comparable control, for example through the composition of the board and the articles. Substantiate that separately in the request.

2. Organisational interlinkage

The enterprises must be under one overarching management that functions as a unit, or the management of one enterprise must be in fact subordinate to that of the other. The same directors or a shared management reinforce this. A holding that exercises actual management over the operating company is a clear example.

3. Economic interlinkage

Economic interlinkage is present if the enterprises in essence pursue the same economic goal (for example serving the same customer base), or if one enterprise performs substantial complementary activities for the other. The mutual relations may not be negligible. The Dutch Supreme Court clarified this in HR BNB 2014/7: there must be non-negligible economic relations between the parts.

An operating company that performs almost exclusively for other group members is economically interlinked. Two companies that operate independently, each with its own market and without mutual supplies, are not.

The three together, plus the other conditions

Besides the three forms of interlinkage, objective conditions apply: each member is a VAT entrepreneur (art. 7(1) VAT Act), is established in the Netherlands or participates through a Dutch fixed establishment, and at least one member is a legal person. A pure, passive holding is in principle not an entrepreneur and therefore falls outside the unity.

Example

Holding B.V. holds 100% of the shares in Werk B.V. (financial), the same director manages both (organisational), and Werk B.V. works mainly for the group (economic). All three forms of interlinkage are cumulatively present, so the fiscal unity exists by operation of law.

Assess your situation

Want to know whether your group meets the three forms of interlinkage and prepare the substantiated request letter? Use our tool. Also read VAT fiscal unity by operation of law on the consequences, and How to request a VAT fiscal unity for the steps.