Netherlands proposes four options for revising corporate tax group regime

By Jian-Cheng Ku & Rhys Bane, DLA Piper Nederland N.V.

On June 17, the Dutch State Secretary of Finance published a consultation document outlining possible approaches for a new corporate tax group regime in the Netherlands.

The consultation document follows emergency reparatory legislation aimed at repairing the Dutch fiscal unity regime, which applies with retroactive effect up to January 1, 2018.

The emergency reparatory legislation was announced on October 25, 2017, when the European Court of Justice decided that the Dutch fiscal unity regime was in breach of the EU freedom of establishment.

The consultation document describes the work that has been done so far to find a long-term solution for the Dutch fiscal unity regime. Following input from various stakeholders, the consultation document presents four possible long-term solutions for the Dutch fiscal unity regime:

1. Maintain the fiscal unity regime, which includes the emergency reparatory measures, expanded with additional reparatory measures if and where necessary;
2. Abolish the Dutch fiscal unity regime without a replacement corporate tax group regime;
3. Introduce a corporate tax group regime where profits or losses can be transferred to group companies;
4. Introduce a cross-border corporate tax group regime with full exemptions for foreign profits and losses.

The four options are briefly described, compared with similar regimes of other jurisdictions, and reviewed for budgetary and administrative purposes.

From the consultation document and prior responses from the Dutch Ministry of Finance, it is clear that the Dutch government is in principle against introducing a cross-border corporate tax group regime as it is feared that this regime would, at least at the beginning, have a lot of loopholes.

The option with the most positive score in the consultation document is the introduction of a corporate tax group regime where profits (a group contribution system similar to Sweden’s system) or losses (a group relief system such as the United Kingdom system) can be transferred to group companies.

The public consultation ends on July 29,, after which it is likely that the Dutch government will explore one, maybe two options in more detail.

It is likely that a draft legislative proposal will also be released for public consultation.