Netherlands ruling on VAT Groups
VAT Group’s enable company that trade together, or who have substantially the same shareholdings, to better manage their VAT risks (joint liability) and cash flows in a way that better reflects their actual trading activities. To qualify as a tax group, companies must satisfy the local tax authorities that there is certainty over the qualification for this beneficial arrangement.
A recent case in the Netherlands, the plantiff’s attempted to avoid joint liability on the VAT of other, defaulting members of the group. They based this on a change in the status of some of the companies which meant they were no longer taxable persons – and therefore not entitled to be a member of a VAT group or share its liabilities.
The Dutch Supreme Court ruled in favour of the tax authorities on the basis that since the plaintiffs had failed to inform the tax authorities at the time of the change, the VAT group was still valid and therefore liability shared.
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