October 30, 2017

When it comes to current practice of Dutch VAT tax team, the regulations and treatment are no longer as flexible as it was in the past. Recently a VAT fiscal unity request was denied by the Dutch tax authority under an argument: the management agreements are not “genuine”.

The Dutch tax inspector took a position that none of the companies is to be regarded entrepreneur for VAT purposes as the management fees are fully ignored. This means that no VAT should be due on the management fees, but neither has any of the companies the right to deduct input VAT.

It appears the tax inspector denies the clear contracts, invoices etc. by referring to the ‘Paul Newey’ case of the Court of Justice dated 20 June 2013. According to this court decision, contractual agreements may in particular be disregarded if it becomes apparent that they do not reflect economic and commercial reality, but constitute a wholly artificial arrangement which does not reflect economic reality and was set up with the sole aim of obtaining a tax advantage. This is a very ‘heavy’ qualification and almost never accepted by the Dutch court unless in case of obvious tax evasion. This is also according to the Dutch tax inspector a recent new position that they take towards management service agreements.