Foreign establishments soon to be excluded from Dutch VAT groups
Foreign establishments soon to be excluded from Dutch VAT groups
As of 1 January 2024 it is no longer possible to include foreign establishments in the EU in a Dutch VAT Group, which will have significant consequences (particularly for the financial sector) for the VAT treatment of supplies between entities that are part of a Dutch group and that have foreign establishments. The State Secretary announced this change a while ago (July 2022). Have you already prepared for the change?
Impact Dutch practice
As a result of the State Secretary's change of course a foreign head office and a foreign fixed establishment can no longer be part of a Dutch VAT group as of January 1 2024. As a result, the Dutch VAT group and a foreign establishment will become separate taxable persons for VAT. This means that, as of January 1 2024, supplies between the Dutch VAT group and foreign establishments will fall within the scope of VAT and will therefore be taxed (unless an exemption applies or the place of supply is outside the EU). This will, for example, have the following far-reaching VAT consequences and risks:
The policy does not apply to non-EU VAT groups. If a non-EU establishment is included in a non-EU VAT group, this VAT group will be ignored, meaning supplies between the head office and the fixed establishment are (in principle) out of scope of VAT.
Of course, we will be happy to assist you in identifying the impact of the change of the decree. It is highly recommended to do this. For questions or advice, please contact one of our consultants. We will be happy to assist you!
Read full update
Impact Dutch practice
As a result of the State Secretary's change of course a foreign head office and a foreign fixed establishment can no longer be part of a Dutch VAT group as of January 1 2024. As a result, the Dutch VAT group and a foreign establishment will become separate taxable persons for VAT. This means that, as of January 1 2024, supplies between the Dutch VAT group and foreign establishments will fall within the scope of VAT and will therefore be taxed (unless an exemption applies or the place of supply is outside the EU). This will, for example, have the following far-reaching VAT consequences and risks:
- Negative impact in terms of non-deductible VAT (for businesses with a limited right to deduction).
- A positive impact for activities, such as recharges, between the Dutch VAT group and foreign establishment, as this may qualify as a VAT taxable supply which results in the possibility to reclaim (more) VAT on costs.
- New declaration and compliance obligations abroad.
- Re-arranging your administration and ERP systems.
- Considering reorganizing the group structure.
The policy does not apply to non-EU VAT groups. If a non-EU establishment is included in a non-EU VAT group, this VAT group will be ignored, meaning supplies between the head office and the fixed establishment are (in principle) out of scope of VAT.
More information?
Of course, we will be happy to assist you in identifying the impact of the change of the decree. It is highly recommended to do this. For questions or advice, please contact one of our consultants. We will be happy to assist you!
Read full update