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The Dutch fiscal unity regime allows groups of companies to file one single tax return and to compute Dutch corporate income tax on a consolidated basis. Initially the fiscal unity could only be formed by Dutch resident companies. On June 12, 2014 the European Court of Justice gave a preliminary ruling regarding the Dutch Fiscal Unity. According to the CJEU it was against EU law to allow a fiscal unity only if Dutch resident companies are involved.
December 17, 2014 the Dutch Minister of Finance announced the amendment of fiscal unity rules in order to be compliant with EU law. The legislative proposal is expected to be launched in the first half of 2015. Until that time, an administrative decree is in place. This decree allows Dutch companies, linked through companies based in other EU Member States, to opt for the Dutch fiscal unity regime.
Under the old Dutch fiscal unity rules, a Netherlands parent company should directly or indirectly hold at least 95% of the shares of each group member and all group members should be resident in the Netherlands or have a Dutch permanent establishment. What is more, when considering an indirectly held company (subsubsidiary), the intermediate (link) company or companies should also be members of the Dutch group. This means that a subsidiary, although itself resident in the Netherlands and under 95% indirect ownership of the parent, may not be a member of the group if any of the link companies through which the parent’s ownership is derived is not resident in the Netherlands. In a simple case, therefore, if Company A (resident in the Netherlands) holds 100% of Company B, which holds 100% of Company C (resident in the Netherlands), Company C cannot be a member of Company A’s group if Company B is resident elsewhere.
The case involved three joined cases relating to the Dutch fiscal unity regime, involving different group structures, but with one common feature: some companies in the group are established in other EU member states. There were two primary fact patterns, namely:
In all of the cases, the fiscal unity request was limited to the Dutch resident companies – the connecting EU companies and the nonresident parent company were not included.
A case with similar fact pattern was the Papillon case, which involved France’s tax consolidation regime. Following the Papillon decision, the European Commission started an infringement procedure against the Netherlands, for not changing the Dutch legislation, after the Papillon case.
When the joined cases appealed to the Tax Court of Amsterdam, the Court referred the cases to the CJEU in order to determine whether the denial of a fiscal unity violated EU law.
The CJEU follows the general rule of Papillon, concluding that the Dutch fiscal unity rules are in violation with EU law. The Dutch authorities rejected the applications for the fiscal unity purely because the connecting companies were not based in the Netherlands. The CJEU considered this as a restriction of the freedom of establishment. The risk of double loss relief and coherence of the tax system was not seen as a justification for this restriction.