Netherlands: Country and Foreign Investment
The Fiscal Unit
At the time of writing, the Netherlands allows for group companies to consolidate their accounts so that the profits of one company can be set off against the loss of another company thereby reducing the overall taxable profit. Since lower tax rates apply to lower rates of corporate profit the fiscal unit is a particularly attractive concession. To obtain this concession the companies must meet the following conditions:
- They must all have the same financial year
- They must all be Dutch resident BV or NV
- They must all be directly or indirectly 95% owned by the same parent company
- They must all have the same tax regime (i.e. not be an insurance or portfolio company)
Dividend payments made between members of a fiscal unit are exempt from tax. Likewise assets and liabilities can be transferred within a fiscal unit without payment of VAT or corporate income tax since for tax purposes everything belongs to the parent company. The Dutch fiscal authorities will give advance tax rulings on whether or not the proposed group structure constitutes a fiscal unit for tax purposes. The minimum required interest in a subsidiary is 95%, making it easier for subsidiaries to grant employee stock options in themselves, rather than in the parent.
A consolidated group can be initiated no earlier than three months after filing a request to do so and can also be terminated during a financial year without it have retro-active effect to the beginning of that year; It is possible to include Dutch permanent establishments of foreign groups into a consolidated group, but not possible to include companies incorporated under Dutch law but resident outside the Netherlands into consolidated groups; A group is taxed on the hidden reserves of the transferred assets only, rather than all the hidden reserves of the vehicle used as means of disposal.
Upon their deconsolidation, subsidiaries may take with them the uncompensated consolidated group losses which can be allocated to them.