For Dutch tax resident sister companies it is not possible to be part of a fiscal unity for corporate tax purposes if the parent company is not residing in the EU or the European Economic Area (EEA). However, this could change given a recent decision of the Dutch Court of Appeal in which this was ruled to be in violation of the non-discrimination article of the tax treaty between the Netherlands and, in this specific case, Israel. This decision opens the possibility to also create a fiscal unity between Dutch sister companies which are held by a parent company or intermediate holding company that is not residing in the EU or the European Economic Area, provided that the relevant tax treaty contains a similar non-discrimination article.

According to the Court of Appeal, the fact that Dutch companies were not allowed to form a fiscal unity solely because of the tax residency of their shareholders, results in taxation that is more burdensome than it would have been, if the shareholders would have been Dutch tax residents. According to the Court of Appeal, this is in violation of the non-discrimination as laid down in the tax treaty between Israel and the Netherlands. Subsequently, these Dutch companies should be allowed to form a fiscal unity.

Possibilities for the future
The decision may offer possibilities for various international holding structures to have their worldwide Dutch companies included in the same fiscal unity. This would allow them to file one consolidated Dutch corporate tax return whereby profits of one company can be offset against the losses of another. Although the Dutch State Secretary of Finance can still file an appeal against this decision, a request for a fiscal unity can already be filed to preserve the right to form a fiscal unity.

It is recommended to review whether or not existing international holding structures with non-EU and non-EEA parent companies could benefit from this decision. After a quick scan review of the structure AKD can advise whether or not a request to apply a fiscal unity can and should be filed. Possible disadvantages of the creation of a fiscal unity should hereby also be taken into consideration.

For further information on this specific case and on how to proceed, please contact Huub Laauwen.