The Dutch VAT-group: what you should know in M&A transactions
The Dutch VAT-group: what you should know in M&A transactions
During mergers and acquisitions (M&A), the existence and VAT position of a VAT-group regularly play a crucial role. Especially when a target company (the company being sold or bought) is part of a VAT-group, or could be part of one after the transaction. It is essential to properly assess the possible consequences for the composition of the VAT-group.
When the Target comprises only part of the existing VAT-group, a share transaction will have greater consequences. The VAT-group will be terminated, but the Target will still remain jointly and severally liable for VAT debts incurred during the period when the Target was part of the VAT-group. This liability ends when the Tax Authorities are notified in writing of the change. It is therefore crucial to monitor carefully whether the composition of the VAT-group changes in the event of a purchase or sale transaction and, if so, to inform the Tax Authorities about this in a timely manner.
The now obsolete ‘Holding Resolution’ included an approval to include a non-taxable holding company in a VAT-group under certain conditions. In the new decree, this approval has been maintained and expanded. This extension relates in particular to the position of non-taxable intermediate holding companies. Whereas the approval in the Holding Resolution was limited to top holding companies, the new decree refers to '(intermediate)holding companies'. This means that non-taxable intermediate holding companies that fulfill a management and policy-making role within a group can also be part of a VAT-group, provided the companies are sufficiently linked from a financial, organizational and economic perspective. Furthermore, the decree explicitly states, that a non-taxable (intermediate) holding company can only act as a VAT-group after a written request has been filed to the Tax Authorities.
However, with the new decree, there seem to be more options. If the BidCo fulfills a policy-making and management role, it can be included in the VAT-group under certain conditions, which may still allow (partial) deduction of the VAT on purchase costs, if a number of (strict) conditions are met.
Do you have any questions about this? Then contact our M&A Tax team or one of our VAT specialists.
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The Target in the VAT-group
If the Target includes all companies of an existing VAT-group, the composition of the VAT-group generally does not change as a result of the sale or purchase. However, it is important to assess after the deal is closed whether the existing VAT-group can constitute a new group with the buyer. If so, it may be desirable to submit a timely request to the Tax Authorities to formalise this.When the Target comprises only part of the existing VAT-group, a share transaction will have greater consequences. The VAT-group will be terminated, but the Target will still remain jointly and severally liable for VAT debts incurred during the period when the Target was part of the VAT-group. This liability ends when the Tax Authorities are notified in writing of the change. It is therefore crucial to monitor carefully whether the composition of the VAT-group changes in the event of a purchase or sale transaction and, if so, to inform the Tax Authorities about this in a timely manner.
Position of (intermediate)holding companies within the VAT-group
The new decree on tax liability of a VAT-group which is applicable as of 1 July, 2025, brings about important changes for, among other things, the position of (intermediate)holding companies in group structures. The new decree replaces the old ‘Holding Resolution’ which was applicable since 1991.The now obsolete ‘Holding Resolution’ included an approval to include a non-taxable holding company in a VAT-group under certain conditions. In the new decree, this approval has been maintained and expanded. This extension relates in particular to the position of non-taxable intermediate holding companies. Whereas the approval in the Holding Resolution was limited to top holding companies, the new decree refers to '(intermediate)holding companies'. This means that non-taxable intermediate holding companies that fulfill a management and policy-making role within a group can also be part of a VAT-group, provided the companies are sufficiently linked from a financial, organizational and economic perspective. Furthermore, the decree explicitly states, that a non-taxable (intermediate) holding company can only act as a VAT-group after a written request has been filed to the Tax Authorities.
A solution to the BidCo problem?
The extended approval also seems to address the so-called BidCo issue. It regularly happens that the Buyer in share transactions is a newly incorporated company (often referred to as BidCo). If this BidCo does not perform VAT-taxable transactions to the purchased subsidiary or other companies after the purchase, the BidCo does not qualify as a taxable person for VAT purposes. This means that the VAT on the expenses incurred by the BidCo for the purchase of the subsidiary is not eligible for deduction.However, with the new decree, there seem to be more options. If the BidCo fulfills a policy-making and management role, it can be included in the VAT-group under certain conditions, which may still allow (partial) deduction of the VAT on purchase costs, if a number of (strict) conditions are met.
Want to know more?
The foregoing stresses that it is very important to act in a timely and careful manner, so that you can respond optimally to the new possibilities and responsibilities when buying and selling companies.Do you have any questions about this? Then contact our M&A Tax team or one of our VAT specialists.
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