On October 16, 2015 on the website of the Dutch Ministry of Finance a law proposal “Wijziging van de Wet op de vennootschapsbelasting 1969 en enige andere wetten in verband met enkele aanpassingen inzake de fiscale eenheid (Wet aanpassing fiscale eenheid)” was published. The law proposal is a reaction to the judgment of the Court of Justice of the European Union (CJEU) in the joined Cases C-39/13, C-40/13 and C-41/13 (SCA Group Holding & Others). These joined cases regard the regulations of the Dutch fiscal unity.
In the Cases C-39/13 (SCA Group Holding BV) and C-41/13 (MSA) the CJEU ruled that Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a Member State under which a resident parent company can form a single tax entity with a resident sub-subsidiary where it holds that sub-subsidiary through one or more resident companies, but cannot where it holds that sub-subsidiary through non-resident companies which do not have a permanent establishment in that Member State.
In Case C-40/13 (X) the CJEU ruled that Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a Member State under which treatment as a single tax entity is granted to a resident parent company which holds resident subsidiaries, but is precluded for resident sister companies the common parent company of which neither has its seat in that Member State nor has a permanent establishment there.
The full text of the judgment in the joined Cases C-39/13, C-40/13 and C-41/13 (SCA Group Holding & Others) can very easily be located via the sub-section “Freedom of establishment” in our section “CJEU Rulings”.
As stated above the law proposal that was published on October 16, 2015 is a reaction to the ruling of the CJEU in the joined Cases C-39/13, C-40/13 and C-41/13 (SCA Group Holding & Others). Therefore the law proposal suggests to amend Article 15 of the Dutch corporate income tax Act (DCIT) in such way that the Dutch law comes in line with the CJEU ruling in the joined Cases C-39/13, C-40/13 and C-41/13 (SCA Group Holding & Others).
Sister companies
A new Paragraph 2 is added to Article 15 DCIT and other Paragraphs are amended. These a.o. introduce the possibility to form a fiscal unity between two Dutch entities of which a top-entity, residing within the EU or the European Economic Area (EEA) owns the complete juridical and economical ownership of at least 95% of the shares in the nominal paid-in capital of two Dutch resident entities. The ownership has to represent at least 95% of the statutory voting-rights in each of the Dutch entities and has to entitle the owner in all cases to at least 95% of the profits and at least 95% of the equity of the Dutch residents.
In order to form a fiscal unity the Dutch entities have to file a joint request. In the request the entities have to state which of them is to be considered to the ‘parent’ of the fiscal unity and which entity (entities) will be considered the ‘subsidiary/subsidiaries’ included in the fiscal unity.
The newly to be added Paragraph 2 intends to create the possibility that a.o. in the next situation a fiscal unity can be formed for Dutch corporate income tax purposes that includes the 2 Dutch entities:
Indirect subsidiaries
The second situation for which the law proposal opens the possibility to form a fiscal unity is the situation in which a Dutch entity indirectly via the interposing of one of more sub-holdings that are residing within the EU or the EEA owns the complete juridical and economical ownership of at least 95% of the shares in the nominal paid-in capital of another Dutch resident entity. Again the ownership has to represent at least 95% of the statutory voting-rights in the Dutch grand-child entities and has to entitle the owner in all cases to at least 95% of the profits and at least 95% of the equity of the Dutch residents.
Paragraph 5 of Article 15 contains the following conditions that a sub-holding has to meet to qualify as a sub-holding:
1. First of all such a sub-holding should be for tax purposes a resident of another EU Member State or a State that is a Member/Party of the EEA. (It is not allowed that based on a DTA concluded between the EU Member State/EEA State and another State the sub-holding is considered to reside in a state that is not a member of the EU or the EEA);
2. Secondly the sub-holding should be, without the possibility to choose or without an exemption subjected to a profit on tax in its state of residency;
3. The sub-holding does have a permanent establishment in the Netherlands via which it carries on a business;
4. At least 95% of the complete juridical and economical ownership of the shares in the nominal paid-in capital of the sub-holding is held by a Dutch taxpayers that are part of the fiscal unity, by a top entity or by other entities that qualify as a sub-holding. Furthermore This ownership has to represent at least 95% of the statutory voting-rights in each of the sub-holding and has to entitle the owner in all cases to at least 95% of the profits and at least 95% of the equity of the sub-holding.
The newly to be added Paragraphs intend to create the possibility that a.o. in the next situation a fiscal unity can be formed for Dutch corporate income tax purposes that includes the 2 Dutch entities:
It will also be possible for Dutch entity 1 and Dutch entity 2 to form a fiscal unity if for example the ownership that Dutch entity 1 has in Sub-holding is less than 100% as long as this is compensated by a larger direct shareholding of Dutch entity 1 in Dutch entity 2 or by a larger shareholding of Sub-holding in Dutch entity 2, in such way that the total of the direct and the indirect ownership that Dutch entity 1 has in Dutch entity 2 meets the at least 95% condition. (NB the participation of Dutch entity 1 in Sub-holding cannot drop under 95%, since otherwise Sub-holding is no longer a qualifying sub-holding with as a consequence that Dutch entity 1 and Dutch entity cannot form a/remain part of the same fiscal unity)
Perhaps it is also good to note that the at least 95% condition(s) is a/are condition(s) that should be met all the time. As soon as (one of the) the ownership(s) does no longer meet this condition, this means that the fiscal unity automatically comes to an end.
Since the forming and ending of a fiscal unity also has implications for other regulations (like for example the possibility for a shareholder to take into account a liquidation loss when a qualifying subsidiary is liquidated), the law proposal also contains proposed amendments to be made to other articles.
Since the forming and ending of a fiscal unity also have implications for other regulations, like for example the liquidation losses that can be taken into account the law proposal also contains proposed amendments to be made to other articles.
Click here to be forwarded to the text of the law proposal (in Dutch) as available on the website of the Dutch Ministry of Finance, which will open in a new window.
Click here to be forwarded to the text of the Memorie van Toelichting (Explanatory Memorandum) (in Dutch) as available on the website of the Dutch Ministry of Finance, which will open in a new window.
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