Netherlands VAT groups conditions eased

Mon 28th Oct 2013

The Dutch courts have ruled that businesses with limited ability to recover VAT may have an improved opportunity to join a VAT Group to help realise savings.

VAT groups simplify VAT recovery

VAT groups enable related businesses to combine Dutch VAT inputs and outputs under a single VAT reporting number.  If the companies are trading together, this can reduce the amount of VAT cash flows as there are no VAT payments.  It also enables related companies to recover otherwise irrecoverable VAT.  This includes exempt or partially-exempt activities such as banking and educational services.  VAT exempt holding companies are not entitled to enter into groups unless they actually own/control the other participants.  Non-resident VAT registered companies may not into VAT groups unless they have a permanent establishment in the Netherlands.

In the Netherlands, companies could only join together in VAT groups if they supplied each other more than 50% of goods or services and shared ownership, plus if they share the same customers.  This latest court ruling, on 11 October 2013, has relaxed the second condition making it easier to create a VAT group.