Dutch Tax Consolidated Group: recent developments

Thursday 29 March 2012

The District Court of the Hague rendered a remarkable decision regarding the scope of the consolidated group for tax purposes (“fiscal unity”) . This decision of the Court of District the Hague is contrary to two decisions of the District Court of Haarlem.

In the case of the District Court of the Hague the parent company and the sub-subsidiary companies had been established in the Netherlands. The subsidiary company was established in another EU Member State and had no permanent establishment in the Netherlands. The District Court of Haarlem recently considered that companies should be able to form a fiscal unity in this situation. The District Court of The Hague decided that there are two possibilities for justification that a fiscal unity is not permitted in this situation. The first justification is that the District Court of The Hague expects a double bilateral losses to be available in The Netherlands and in the Member State of the subsidiary company. This argument has not been addressed in the Papillon Case, where the ECJ ruled that a French parent company and a French sub-subsidiary company should be able to form a consolidated group or fiscal unity, in spite of the intermediate subsidiary being situated in another Member State. The second justification of the District Court of the Hague is that tax avoidance remains possible if the subsidiary company relocates to another EU Member State and if a Member State changes its regime. The company appealed against the decision of the District Court of The Hague. The Court of Appeals of The Hague or the Court of Appeals of Amsterdam now both need to clarify the sustainability of this indirect intervention in  this case.

Also regarding the consolidated group regime, on June 16, 2011 the European Commission requested the Dutch Government to abolish the restrictions for the application of the regime in the Corporate Income Tax, prohibiting two Dutch affiliated companies held by the same foreign parent company without a permanent establishment in the Netherlands from forming a fiscal unity. 
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