Netherlands: Fiscal unity, Dutch “sister companies” - KPMG Global
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Netherlands: Fiscal unity, Dutch “sister companies” having non-EU parent company

Netherlands: Fiscal unity, Dutch “sister companies”

The Dutch Supreme Court on 15 December 2017 held that a request by Dutch “sister companies” to create a fiscal unity, when their common parent company was established in a third country (a country outside the European Union (EU) or European Economic Area (EEA)) does not have to be granted—regardless of non-discrimination provisions in most tax treaties concluded by the Netherlands that prohibit the higher taxation of companies if the shareholder is not established in the Netherlands.


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Under earlier case law, it was possible to form both a fiscal unity between sister companies and a “Papillon fiscal unity” based on the EU law principle of the freedom of establishment. However, this only applied within the EU and the EEA. 

Under legislation in response to case law, parent companies and intermediate holding companies established in EU Member States are regarded as qualifying top and intermediate companies. Although the EU principle of free movement of capital applies to third countries, it cannot be invoked against national rules that only apply to shareholdings that allow the shareholder to exercise decisive influence on the policy of the subsidiary—e.g., with the fiscal unity due to the 95% requirement. EU law does not resolve the situation when a parent company or intermediate holding company is established in a third country. 

In the instance case, a lower court held in April 2016 that by invoking the non-discrimination clause of the tax treaty concluded between the Netherlands and Israel in 1973, a request for a fiscal unity had to be granted in the case of four Dutch companies (sister companies) having a joint, ultimate parent company that was established in Israel (but without a permanent establishment in the Netherlands). 

Supreme Court’s decision

In its December 2017 judgment, the Supreme Court held that the fiscal unity does not have to be allowed, finding that if the Dutch (sister) companies had a resident parent company, they would not have been able to form a fiscal unity with one another without including the parent company. 

The Supreme Court thus implied that the non-discrimination provision does apply to consolidation tax regimes. 

The Supreme Court concluded that, since companies resident in Israel are not subject to corporate income tax in the Netherlands, they cannot be part of the fiscal unity (no cross-border fiscal unity). 


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

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