Structuring of VAT & real property transfer tax for (multinational) groups
The way a (multinational) group is structured determines its tax position. We have extensive experience with analysing such groups in terms of the best possible tax position. An aspect that is often relevant here is the “VAT group”. We also have extensive experience with advising on the consequences of intercompany transfer transactions, both within the Netherlands and cross-border.
The most frequently used method of analysing the tax aspects of a (multinational) group is to perform a quick-scan. The design of this quick-scan can be decided in consultation with the client. In most cases it involves an examination of the accounts and other relevant documents, supplemented with a discussion. On the basis of this information we produce a report containing an evaluation of the relevant VAT topics, and the tax policy for a future period can then be determined.
Importance of the “VAT group” for (multinational) groups
Because functions are distributed over several legal persons within a (multinational) group, it is usually the case that (many) intercompany transfer charges are made for goods and/or services provided between those group companies. It is essential to know whether a “VAT group” exists and, if so, to apply for a confirmation decision and to maintain this VAT group, so that VAT does not have to be charged on these intercompany transactions. In most cases this VAT would be deductible, so the only disadvantage would relate to liquidity. However, for (multinational) groups that engage in (some) VAT-exempt transactions, the VAT is not (fully) deductible. In that situation, the VAT charged on intercompany transactions is a cost item.
A VAT group can exist without the requirement of a tax inspector’s decision or confirmation. It is therefore always important to check whether a (multinational) group satisfies the requirements for a VAT group. Whenever changes are made in the composition of the VAT group (a company leaves or joins the group), these changes must be notified to the Dutch Tax & Customs Administration (TCA: Belastingdienst) in good time, because unless written notification of leaving the VAT group is given, the members of that VAT group remain jointly and severally liable for any VAT debts of the company that leaves. Conversely, it is also possible that in this situation the company that leaves can be held jointly and severally liable for any VAT debts of the companies that stay in the VAT group.
Restructuring of real property
In the restructuring of real property, an important point is that the transfer of both legal ownership and beneficial ownership will (in principle) result in an acquisition on which real property transfer tax is charged. However, the law provides for exemptions that in certain situations make it possible – for (multinational) groups especially in the case of restructurings – to take over real property without having to pay real property transfer tax. Conditions are attached to the various exemptions, and it is essential to look critically at whether they are fulfilled. It is also important to analyse carefully in advance what the purpose of the restructuring is, and which exemption is the most appropriate for this. In order to perform a real property restructuring correctly and with optimum tax arrangements, it may be desirable to obtain an advance ruling from the TCA. We therefore often hold discussions of this kind with the TCA.
In the context of a company takeover, it is important to realise that there are (or can be) different VAT consequences depending on how the takeover is structured. In the case of the sale or takeover of a private limited company (in Dutch: BV) in the form of a shares transaction, the takeover is not subject to VAT. In the case of the sale or takeover of a company in the form of an assets-liabilities transaction, it is very important to determine whether this takeover is subject to VAT. If VAT is mistakenly charged on a takeover, the TCA can refuse the buyer’s deduction of that VAT, with the result that the buyer is left with an extra cost item. To exclude risks, it is often advisable to obtain an advance ruling from the TCA.
Another question that arises in the case of the sale or purchase of a participating interest is whether the VAT paid on (consultancy) costs (as input tax) is deductible. In many cases it will be deductible, if those costs can be regarded as “overheads” for the group, which depends on both how the group is structured and the relationship between the client and the contracted party. In view of the organisational nature of this aspect, it is something over which a company itself has considerable influence, as long as it receives attention at an early stage.