From two to one taxpayer

A fiscal unity for corporate income tax (FE Vpb) combines the parent company and subsidiary(ies) into a single taxpayer (Art. 15 Corporate Income Tax Act). Benefits: mutual offsetting of profits and losses, intercompany transactions without tax consequences, and a single corporate income tax return. Requires a 95% interest and an application to the Tax and Customs Administration. In the event of dissolution: a tax return plus any compartmentalization. Below: conditions, pros and cons, how to apply — and what Karim's accountant outlines before the holding company acquires a new operating company.

The short answer

• What: Mother and daughter(s) consolidated for tax purposes into a single corporate income tax payer.
• Condition: parent company owns at least 95% of issued share capital.
• Legal basis: Art. 15 Corporate Income Tax Act.
• Advantage: loss set-off between BVs, intercompany tax-free.
• Application: joint request to the Tax and Customs Administration, effective date of your choice.

What is a fiscal unity?

For tax purposes, the Tax and Customs Administration treats the parent company and subsidiary(ies) as if they were a single enterprise. In practice:

• One joint corporate income tax return.
• Profits and losses can be offset against each other.
• Intercompany transactions (within the group) without tax consequences.
• Application approved by the Tax and Customs Administration — not automatically.

Under civil law, the BVs remain separate — own legal personality, own management, own annual accounts. For tax purposes: one.

Terms and Conditions

For application (Art. 15 Corporate Income Tax Act):

1. Parent company: BV, NV or similar foreign company, established in the Netherlands.
2. 95% interest: parent company owns at least 95% of the issued and paid-up capital and the voting rights.
3. Established in the Netherlands: all BVs within the group must be established in the Netherlands (since the Papillon judgment, an EU subsidiary may also participate under certain conditions via X-BV in the Netherlands).
4. Same financial year: all BVs have the same financial year.
5. Same regime: no exempted or special regimes.
6. Joint request: submitted by all involved companies.

Advantages

1. Loss set-off

Losses at a subsidiary can be directly offset against profits at the parent company (or another subsidiary). Without a fiscal unity: losses are only deductible within the same BV (1-year carry-back, unlimited carry-forward).

Example: holding company makes a profit of €100,000, subsidiary a loss of €50,000. With fiscal unity: net taxable amount of €50,000. Without fiscal unity: subsidiary has a loss that must be set off later.

2. Intercompany tax-free

Transactions between BVs within the group are disregarded for tax purposes. No corporate income tax on internal profits — selling property between BVs, for example, without settlement.

3. One declaration

Administratively simpler: one corporate income tax return for all BVs within the group.

Disadvantages

1. Joint and several liability

Each BV within the group is jointly and severally liable for the corporate income tax debt of the group (Art. 39 Income Tax Act). In the event of bankruptcy of one: the other BVs must still bear the corporate income tax debt.

2. Limited application of tariffs

The low corporate income tax rate of 19% applies to the first €200,000 of the unit (not per BV). In the case of multiple BVs, each with its own profit: splitting them up no longer helps.

3. No intercompany participation exemption

Within the unit, the participation exemption is superfluous — it does not work. Upon dissolution: a return to the participation exemption regime can cause complications.

4. Compartmentalization upon dissolution

Upon dissolution: hidden reserves and goodwill must be compartmentalized. Administration becomes complex.

To request

Steps:

1. Joint request by all BVs, signed by directors.
2. Choose effective date — usually the beginning of the financial year, retroactive effect of up to 3 months is possible.
3. The Tax and Customs Administration assesses and issues a decision.
4. Effective date: one corporate income tax return for the unit.

Breakage

A fiscal unit ends:

• In the event of a joint request for dissolution.
• In the event of loss of a 95% interest (e.g. sale of subsidiary).
• Upon dissolution or liquidation of a BV.
• Upon change of tax regime.

Points to consider upon termination:

• Notification to the Tax and Customs Administration is mandatory — failure to do so can lead to an additional assessment.
• Compartmentalization of hidden reserves and goodwill.
• Possible settlement upon sale of subsidiary.
• Tax return for partial years.

Karim's holding structure

Karim's holding company owns 100% of the operating company. First 3 years: subsidiary incurs a loss, holding company has passive investment income. With Federal Corporate Income Tax (FE): the holding company can immediately offset the subsidiary's €80,000 loss against the holding company's €50,000 profit. Without FE: the subsidiary accumulates a loss; the holding company pays corporate income tax on €50,000.

From year 4: subsidiary profitable. Fiscal Integration remains beneficial for administration and intercompany transactions. Upon sale of subsidiary: dissolution with compartmentalization — have a tax specialist plan ahead in good time.

Honest recommendation

For SME limited liability companies with a holding company and an operating company, FE Corporate Income Tax is almost always advantageous — loss set-off and ease of administration. The disadvantage of joint and several liability is outweighed by the benefits. Dissolution and amendments: notify in a timely manner and plan for compartmentalization. Have the application and annual return handled by a tax specialist with corporate income tax experience — small errors can be costly.

For other topics: Corporate income tax return, participation exemption and VAT fiscal unity.

Frequently Asked Questions