Requirements for a Dutch VAT fiscal unity: the three forms of interlinkage

The requirements for a Dutch VAT fiscal unity are three cumulative forms of interlinkage: financial, organisational and economic. On top of that, each member must be a VAT taxable person, each member must be established in the Netherlands or have a Dutch fixed establishment, and at least one member must be a legal person. Meet all of these and the fiscal unity exists by operation of law (article 7(4) of the Dutch VAT Act 1968).

Financial interlinkage: more than 50%

Financial interlinkage is met if more than 50% of the shares, including control over them, of each enterprise is directly or indirectly in the same hands. This is a different threshold from the 95% ownership requirement of the CIT fiscal unity. The two are often confused in practice: for VAT, more than half is enough; for corporate income tax, nearly the full interest must be in the same hands.

Organisational interlinkage

The enterprises are under one overarching management that functions as a unit, or the management of one enterprise is in fact subordinate to that of the other. The classic example is the same director managing both the holding company and the operating company. Shared management or overlapping statutory directors also point to organisational interlinkage.

Economic interlinkage

The enterprises in essence pursue the same economic goal, or one enterprise performs substantial complementary activities for the other. More than 50% complementary activity is the rule of thumb. 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, not merely an incidental link.

Other requirements

Besides the three forms of interlinkage, objective conditions apply. Each member must be a VAT taxable person (article 7(1) VAT Act). Each member must be established in the Netherlands, or participate through a Dutch fixed establishment. And at least one member must be a legal person; natural persons and partnerships may take part, but not as the only members. A pure, passive holding company is in principle not a taxable person for VAT and therefore does not automatically qualify as a member, even if it meets the three forms of interlinkage.

Meet the requirements? Then the unity exists by operation of law

If the three forms of interlinkage are cumulatively present and the other conditions are also met, the VAT fiscal unity exists by operation of law. You do not need permission for that. A ruling from the inspector does give certainty about the existence, the designation and the liability, but it works going forward, with no retroactive effect. When a new member joins, keep in mind the joint and several liability under article 43 of the Collection Act 1990: each member can be held liable for the full VAT debt of the unity.

Example

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

Get started

Want to assess your group's interlinkage and request a Dutch VAT fiscal unity? Also read Interlinkage in the VAT fiscal unity for a detailed explanation of each form.