What is a Dutch VAT fiscal unity?
A VAT fiscal unity lets two or more entrepreneurs that are financially, organisationally and economically interlinked act as a single taxable person for VAT (article 7(4) Dutch VAT Act 1968). Supplies between members fall outside the scope of VAT and the unity files one combined VAT return.
Request letter with interlinkage motivation in Word and PDF, € 49 excl. VAT
How does it work?
Within the fiscal unity, supplies and services between members are not subject to VAT. The unity acts externally as a single entrepreneur and files one combined VAT return. This simplifies administration and avoids VAT leakage on non-deductible internal supplies (for example with exempt activities or a holding structure).
The fiscal unity exists by operation of law once the three forms of interlinkage are met. A ruling from the inspector formalises the unity and applies going forward.
Conditions for a VAT fiscal unity
A VAT fiscal unity arises when all of the conditions below are met at the same time (article 7(4) Dutch VAT Act 1968):
- 1.Financial interlinkage: more than 50% of the shares, including control, of each member is directly or indirectly in the same hands.
- 2.Organisational interlinkage: the enterprises are under one overarching management, or one is in fact subordinate to the other.
- 3.Economic interlinkage: the enterprises in essence pursue the same economic goal, or perform substantial complementary activities for each other (non-negligible mutual supplies).
- 4.Entrepreneur established in the Netherlands: each member is a VAT entrepreneur established in the Netherlands, or participates through a Dutch permanent establishment.
- 5.At least one legal person: at least one member is a legal person (bv, nv, cv, cooperative, mutual insurer, foundation or association).
Not sure whether your group qualifies? Check the interlinkage with our tool and prepare the request letter right away.
The three forms of interlinkage
Article 7(4) Dutch VAT Act 1968 requires the entrepreneurs to be financially, organisationally and economically interlinked. The three conditions are cumulative.
Financial interlinkage
More than 50% of the shares, including the control over them, of each enterprise is directly or indirectly in the same hands. For a foundation or association without shares this follows from comparable control (board and articles).
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. Shared directors reinforce this.
Economic interlinkage
The enterprises in essence pursue the same economic goal (e.g. the same customer base), or they perform substantial complementary activities for each other with non-negligible mutual supplies (HR BNB 2014/7).
Read more about the test in Interlinkage in the VAT fiscal unity.
Who can participate?
- ✓Any VAT entrepreneur can participate, including sole traders, partnerships and foundations.
- ✓All members are established in the Netherlands, or participate through a Dutch permanent establishment.
- ✓At least one member is a legal person (bv, nv, cv, cooperative, mutual insurer, foundation or association).
- ✓A pure holding that does not involve itself in management is in principle not an entrepreneur and cannot be included on its own.
Effects and points to note
- ⚠Supplies between members are outside the scope of VAT; the unity files one combined return.
- ⚠The unity exists by operation of law; assess whether it already existed over past periods.
- ⚠Joint and several liability for the VAT of the unity (article 43 Collection Act 1990).
- ⚠Report accession, partial dissolution or termination to the tax office.
Read more: VAT fiscal unity by operation of law.
How do you prepare the request?
Unlike the CIT unity there is no official Belastingdienst form. You prepare a request letter that substantiates the three forms of interlinkage and asks the inspector for a ruling. Our tool prepares that letter for you, with an interlinkage motivation, in Word and PDF.
Read the step-by-step explanation in How to request a VAT fiscal unity.
Unsure between VAT and CIT? Read CIT fiscal unity vs VAT fiscal unity: what is the difference?.
Pros and cons
A VAT fiscal unity saves VAT on supplies between members and means one combined return. The main drawbacks are joint and several liability and the by-operation-of-law effect, including over past periods. Weigh both before having the unity recorded.
Benefits
- ✓Supplies and services between members remain outside the scope of VAT.
- ✓One combined VAT return for the whole unity, so simpler administration.
- ✓Avoids VAT leakage on internal supplies, for example with exempt activities or a holding structure.
- ✓VAT payable and reclaimable are netted within the unity.
Drawbacks and points to note
- ⚠Joint and several liability: each part is liable for the VAT debt of the whole unity (article 43 Collection Act 1990).
- ⚠The unity arises by operation of law, so it may already have existed over past periods, affecting earlier returns.
- ⚠Accession, partial dissolution and termination must be reported to the tax office.
- ⚠One external VAT identity, so less flexibility per individual company.
Questions about the VAT fiscal unity
Do I apply for a VAT fiscal unity, or does it arise automatically?
A VAT fiscal unity arises by operation of law once the entrepreneurs are financially, organisationally and economically interlinked (art. 7(4) VAT Act 1968). You ask the Belastingdienst for a ruling that formalises the unity; this gives certainty about the designation and liability and applies going forward.
What are the three forms of interlinkage?
Financial interlinkage: more than 50% of the shares, including control, of each member is directly or indirectly in the same hands. Organisational interlinkage: there is a joint, overarching management or subordination. Economic interlinkage: the enterprises in essence pursue the same economic goal, or more than 50% complementary activities with non-negligible mutual supplies.
Which legal forms can participate?
Any VAT entrepreneur established in the Netherlands (or with a Dutch permanent establishment) can participate, including sole traders, partnerships and foundations. At least one member must be a legal person (bv, nv, cv, cooperative, mutual insurer, foundation or association).
Who is liable for the VAT debts?
Once the fiscal unity is established by ruling, the parts are jointly and severally liable for the VAT of the unity (article 43 of the Collection Act 1990).
How does this differ from a CIT fiscal unity?
They are two separate regimes. The VAT unity rests on interlinkage (art. 7(4) VAT Act 1968) and arises by operation of law. The CIT unity rests on a 95% ownership requirement (art. 15 CIT Act 1969) and only takes effect after a written request. A group can be in both at once or in only one.
Prepare your VAT fiscal unity request
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