Netherlands: VAT on professional services | KPMG Global
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Netherlands: VAT on professional services; deductible if unsuccessful share deal?

Netherlands: VAT on professional services

In the Netherlands, the value added tax (VAT) on professional services generally can be deducted if a takeover is unsuccessful, provided that there is an objective intention to provide services subject to VAT in respect of that participation. The objective intention requirement is present if investigation shows that the acquirer is involved in the management of the other participations already held, or if its policy makes clear that new participations are always added to the existing VAT group.


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The Dutch tax authorities can require that the intention to perform activities subject to VAT be substantiated with objective data (e.g., draft contracts, minutes of board meetings, remarks made in the financial statements, etc.). If the business can satisfy this request, experience reveals that this position can be maintained in respect of new participations that are to be acquired—even if the transaction does not go ahead. In such instances, the deduction is applied in line with the normal deduction entitlement that applies to the taxpayer’s entire business activity. If the acquirer does not yet have a track record for its existing participations, or always holds it participations passively, then the VAT on professional services may appear to be non-deductible.

Implications of CJEU referral from Ireland

The Supreme Court of Ireland in May 2017 requested the Court of Justice of the European Union (CJEU) to render a preliminary ruling in a VAT case (Ryanair C-249/17). The two questions posed to the CJEU concerned the deductibility of VAT on professional services. The taxpayer had purchased these services, because the company wished to acquire shares in its competitor. The High Court of Ireland previously held that the VAT on these professional services could not be deducted, because the takeover attempt had ultimately failed. 

The outcome in this case could be particularly significant to, for example, private equity firms and the M&A practice within groups.

How will the CJEU hold? 

  • The CJEU could refer to previous conclusions in Cibo Participations (C-16/00). 
  • The Irish court has asked to what extent the VAT on the professional services would be deductible if the takeover had been successful. The CJEU could conclude that it has already ruled on that question in earlier cases. 
  • Lastly (and perhaps unlikely), the CJEU could also reformulate the questions referred to it for a preliminary ruling so that it can address the situation when a takeover is unsuccessful. In that instance, the CJEU could very well leave it up to the national court to examine whether the taxpayer holds its (existing) participations as an economic or a non-economic activity within the group.

KPMG observation

The outcome of the CJEU’s judgment could be particularly significant to, for example, private equity firms and the M&A practice within groups. Taxpayers that are intending to make acquisitions need to consider reviewing their VAT position on time. It may be wise in the early stages of an acquisition to objectively substantiate that the taxpayer intends to perform activities subject to VAT for the intended participation, and thus enable the taxpayer to secure the recovery of input VAT as much as possible, even if the acquisition is unsuccessful.

In the Netherlands, taxpayers currently consulting with the Dutch tax authorities and that supplementary assessments have been or will be imposed, need to consider filing a notice of objection in order to preserve their rights, and refer to the Ryanair case (C-249/17). In some instances, it may be advisable to wait for the CJEU judgment.


Read a July 2017 report prepared by the KPMG member firm in the Netherlands

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