VAT and holding companies: holding resolution repealed in 2025

From 1 July 2025, the VAT position of holding companies in the Netherlands will change. A number of ‘favourable’ rules will be repealed. Among other things, this affects the right to deduct VAT on expenses and the possibility of including holding companies in a fiscal unity for VAT purposes.

In this article, our experts discuss the consequences of revoking the ‘holding resolution’ and the practical effects of the new policy decrees.

VAT deduction and ‘holding resolution’: incentive rules

Under the 1991 ‘holding resolution’, holding companies may be included in a fiscal unity for VAT purposes even if they are not a VAT entrepreneur. Furthermore, active holding companies have been able to deduct VAT on costs related to transactions involving shares under certain conditions since 2004. These measures were intended to make the business climate in the Netherlands more attractive.

Ongoing development of European jurisprudence

However, the Netherlands must also take European agreements into account when applying VAT rules, including the jurisprudence of the Court of Justice of the European Union (CJEU). In recent years, European courts have made a substantial number of rulings on the VAT position of holding companies. This gradually led to doubts about whether Dutch policy was tenable. Numerous times, it was rumoured that the holding resolution would be amended or repealed. It never came to that point - until now. On 10 December 2024, the State Secretary of Finance published two new decrees on the VAT position of holding companies.

New decree on holding companies and fiscal unity for VAT purposes

Among other things, the first decree gives policy rules about the fiscal unity for VAT purposes. This is a legal figure with which, under certain conditions, multiple legal entities can be classified as a single VAT entrepreneur if they are so interrelated that they form a unity. From the decree, among other things we note the following:

• A ‘pure holding company’ does not act as a VAT entrepreneur because it has no activities other than holding shares and related activities as a shareholder. Such pure holding companies can no longer be part of a fiscal unity for VAT purposes.

• A holding company or intermediate holding company that meets the description of a pure holding company can still be included in the fiscal unity for VAT purposes under certain conditions. This concerns holding companies that perform a steering and policy-setting function within the group for the benefit of the operating companies, and that perform an actual economic function within the group. The holding resolution contained almost identical approval.

• The decree also contains guidance on other topics such as the VAT treatment of activities of certain supervisors, and an explanation of the financial, organisational and economic links of the fiscal unity for VAT purposes.

• The decree will take effect from 1 July 2025 and the existing holding resolution will be repealed.

New VAT deduction decree and transactions involving shares

The second new decree addresses the deduction of input VAT for transactions involving shares. In general, the following points stand out:

• If shares are traded over a stock exchange, the place of establishment of that stock exchange is used to determine the place of establishment of the buyer.

• The consideration for the sale and transfer of shares is not included in the ‘pro rata’ for VAT deduction if it constitutes an ancillary financial transaction.

• The decree will come into force as of 1 July 2025 and the existing decree on levying VAT in relation to the sale of shares will be repealed.

With regard to VAT deduction, the second new decree makes the distinction between transactions involving shares that fall outside the scope of the VAT and transactions that fall within this. In this article, our experts further explain the second new decree.

Solid grounding, but ambiguities remain

Although the interpretation of VAT law in the new decrees is more in line with CJEU jurisprudence, the VAT position of holding companies has not become much clearer. For example, the distinction between costs incurred prior to a sale of shares and costs incurred after it seems rather arbitrary. And how should the costs for other share transactions within the scope of the VAT, such as the purchase or issue of shares, be treated? It remains to be seen how the Dutch Tax Authorities will apply and interpret the decrees in practice.

Map out the consequences in good time

With the repeal of the holding resolution, among other things, several advantageous regulations will come to an end. For example, it will no longer be possible to deduct VAT related to the sale of an actively held majority interest in all cases. It also removes the current approval under which shareholder activities do not affect the deduction rights of an entrepreneur in certain cases. In contrast, extension situations are actually more broadly defined, which may mean that certain transactions involving shares fall within the scope of the VAT sooner than before.

Do you have holding companies in your corporate structure? If so, make sure you have the consequences of the amended decrees on your VAT position mapped in good time. Our experts will be happy to help you with this. If you have any questions about your VAT position, or if you want to know more about the changed treatment of holding companies, please contact the VAT & Customs Advisory team at Baker Tilly.

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.