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    Active holding companies can be included in a VAT group

    On 11 September 2015 the Dutch Supreme Court confirmed that active holding companies can be included in a VAT group. In this decision, the Supreme Court referred to the Dutch Holding Resolution [1] which determines that a holding company (that does not charge for its services) taking on a controlling and deciding role, needs to fulfill a "substantial economic function" within a group of companies.

    Should a holding company fulfill such a role, the economic interconnectedness required for the creation of a VAT group is presumed to be present. Even though an active holding company does not qualify as an entrepreneur from a VAT perspective, it is still possible to include it in a VAT group.

    The Court of Appeals in The Hague judged this case in an earlier instance, and they came to a similar consideration. However, the Supreme Court decided that the Court of Appeals did not determine enough facts and circumstances to be able to conclude that this particular holding company qualified as an active holding company as mentioned in the Holding Resolution. The case in question will therefore have to be judged again, to determine whether or not the stringent conditions the Holding Resolution poses for a qualification as an active holding company have indeed been fulfilled.

    In this respect further examination is required regarding the role of the holding company within the framework of its controlling and deciding engagements. According to the Supreme Court, this means that it has to be determined whether or not the holding company is predominantly engaged with the intragroup decision process and, as a whole, subservient to the business operation of the affiliated operating companies.

    In our opinion, this decision eliminates any uncertainty about the admissibility of an active holding company to a VAT group, provided the Holding Resolution’s strict requirements are met.

    Please note, however, that the aforementioned is not applicable to situations in which an active holding company performs services (like management and consultancy activities) to affiliated operating companies, for which it is remunerated. Such a holding company already qualifies as an entrepreneur for VAT purposes, and can therefore be included in a VAT-fiscal unity.

    [1] Resolution of the State Secretary for Finance on 18 February 1991, nr. VB91/347

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