On December 11, 2014 the Court of Appeals Amsterdam (“the Court”) ruled in three cases that Dutch legislation on the fiscal unity for corporate income tax purposes is contrary to the European freedom of establishment. Therefore, the Dutch Tax and Customs Administration (“DTCA”) may not refuse the application of the fiscal unity in these cases. The cases concerned requests for the formation of a fiscal unity between sister companies of a European parent company and between a domestic parent company and a domestic sub-subsidiary held through an intermediate holding company resident in another EU Member State.


These judgments of the Court follow a decision of the Court of Justice of the European Union (“CJEU”) on June 12, 2014 in response to the request for a preliminary ruling that the Court had submitted to it in these proceedings, one of which was instigated by Meijburg & Co on behalf of one of its clients.

Relevant facts and the dispute

The three proceedings concern internationally operating businesses that are also active in the Netherlands with various Dutch-resident operating, holding and/or financing companies. In one of the cases, the Dutch companies are subsidiaries of a German parent company; in the other two cases, the Dutch companies are held by a Dutch parent through German intermediate holding companies.

The requests that were filed all invoked the European freedom of establishment as substantiation for including the Dutch companies in a fiscal unity, despite the fact that the common parent company or the intermediate holding companies are all established in Germany. The DTCA rejected the requests by invoking Dutch law, with one of the reasons given for the rejection being the alleged risk of losses being deducted in both the Netherlands and Germany, i.e. international double loss set-off.

Court of Appeals Amsterdam

In line with the CJEU, the Court has now ruled that there is a restriction on the freedom of establishment.

In the case of sister companies of a European parent company, this restriction cannot be justified on the grounds of reasons of overriding public interest. The Court rejected the arguments put forward by the DTCA as a justification ground, particularly the need to preserve tax coherency, including the necessity of avoiding national and international double loss set-off.

In the case of a domestic parent company and a domestic sub-subsidiary, the restriction can nevertheless be justified by the need to maintain the coherence of the tax system. This is not proportionate, however, because the legislator is able to adopt measures to prevent double loss set off.

Both forms of fiscal unity should therefore be permitted, according to the Court. However, the DTCA may maintain the statutory notice period of three months, such that a fiscal unity may not be formed earlier than three months before the date on which the request is made.

Commentary by Meijburg & Co

This case law represents an important milestone and is in line with previous case law of the CJEU. It is still unclear how it will be implemented by the Dutch legislator and how soon this will happen. It should be noted that a similar case is pending before the Supreme Court. It is conceivable that the legislator will await this judgment before submitting a bill, although that no longer appears to be necessary.

Moreover, it is important to realize that this does not involve cross-border loss set-off; the loss set off only relates to Dutch profits and losses and to this extent does not contain any cross-border elements. In such cases it is crucial that timely action is taken in order for rights to be preserved. A request for a fiscal unity can be made up to three months after the desired commencement date.

If you would like more information on this issue, our tax advisors will naturally be happy to be of assistance.

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