Benefits of the fiscal unity in corporation tax

There are a number of good reasons to list companies as a unity in the corporation tax. For example, in this construction ‘horizontal loss compensation’ is possible; the losses that a company has made within a business group can be compensated with the profits of a different company in that same year. Or in short; you can move assets around. Profit and capital movement within the fiscal unit are not taxed in principle. There is no profit gain between company transactions that are part of the unity.

This means that with internal business group transactions, you do not need to worry about the correct price, because silent reorganisation is possible. Within the fiscal unity, regroupings can take place without this having consequences for the corporation taxes. Administrative obligations can be decreased, because you will only need to do one declaration of corporation tax in total. You can therefore, have both tax benefits by creating a fiscal unity and simplify your companies’ administration.

Disadvantages fiscal unity in corporation tax

Creating a fiscal unit for the corporation tax is not always beneficial. For example, a disadvantage of the fiscal unit is that the sacrificed amount of the joint participation is lost, so that with a possible later liquidation a smaller liquidation loss can be deducted from the profit. Loss compensation exceeding calendar years, also contains a few limitations. Especially concerning the compensations for loss over the moment of entering the fiscal unit and the moment when the fiscal unit is terminated.

The investment deduction will also only apply once. That means that all investments of the fiscal unit are included together. There is a maximum amount of investments that can be deducted. This can be disadvantageous when all the companies together exceed the maximum, while this would not be the case per company.

In addition, all associates that belong to the fiscal unit are jointly and severally liable for the corporation tax of the fiscal unit in principle.

Conditions Fiscal unity

Do you think it can be advantageous to combine companies into a fiscal unit in the corporation tax? Then it is the question whether the companies meet the requirements that the Tax Authorities have set. When the conditions below are met, your request to form a fiscal unit will be honoured in principle.

• The parent company owns at least 95% of the shares of the subsidiary. 
• The parent company is entitled to at least 95% of the profit and capital of the subsidiary;
• The parent company has at least 95% of the votes of the subsidiary;
• The parent company has to be a private company, public limited company, a mutual company, cooperation, foundation or association that acts as a housing cooperation or a foreign legal entity that is comparable to one of these;
• The subsidiary has to be a private company or public limited company or a foreign legal entity that is comparable to one of these;
• The parent company and subsidiary must handle similar fiscal years and profit determinations;
• Parent company and subsidiary are factually established in The Netherlands.

Creating a fiscal unit

When you want to create a fiscal unit, all partnerships together will have to submit a request with this form (in Dutch) with the tax office of the parent company. But do pay attention: it is advisable to carefully check all the fine prints. It is important to determine if these are not disadvantageous for your future fiscal unit. In addition there are numerous details that make it complicated to apply the unity policy to your specific situation. Finally, take note: a fiscal unit for the corporation tax is not the same as a fiscal unity for the VAT.

Want to know more?

When you want to know more about creating a fiscal unity, click here (in Dutch). Learn more about taxation and businesses in The Netherlands on this website of the Dutch government (in English).