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 99%* owned by the
same parent company
They
must all have the same tax regime (i.e. not be an
insurance or portfolio company)
*(See below
for changes)
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. Restrictions on the Fiscal Unit
Dual Resident Corporations:
A dual resident company may or may not be accepted
as part of a fiscal unit.
Companies
incorporated in a Foreign Jurisdiction: A company
incorporated in a foreign jurisdiction whose central
management and control is in Holland (and which is
therefore a Dutch resident company) will only be accepted
as part of a fiscal unit if it can comply with a number
of additional stringent criteria.
Prior
Losses: Accumulated losses of a company which
relate to a period prior to it becoming part of the
fiscal unit cannot be pooled against the profits of
other companies in the fiscal unit.
Joining or Leaving during the Fiscal Year:
If the shares in a company which is part of a fiscal
unit are sold during the year its profits or losses
will not be included in the accounts of the fiscal
unit since to be included in the fiscal unit tax return
you have to be in it for the whole financial year.
A
revised fiscal unity regime came into effect from 2003,
making the following key changes to the previous regime:
The minimum required interest in a subsidiary has
been reduced from 99% to 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 now possible
to include Dutch permanent establishments of foreign
groups into a consolidated group, but it will no longer
be possible to include companies incorporated under
Dutch law but resident outside the Netherlands into
consolidated groups; The rules with regard to the
transfer of hidden reserves and their subsequent disposal
have been relaxed. A group is now 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.
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