new group regime for corporation tax

Update on new group regime for corporation tax

Update on new group regime for corporation tax

6 October, 2020

In a recent letter, the State Secretary for Finance outlined the current status of the introduction of a new group regime for corporation tax, following an internet consultation on this issue in 2019. The reason for the letter was the ruling from the European Court of Justice which led to the Fiscal Unity Emergency Repair Act (Wet spoedreparatie fiscale eenheid). The aim is to achieve a robust and future-proof group regime for corporation tax to replace the current fiscal unity regime.

Potential solutions

The 2019 consultation document listed four potential solutions:

  1. Continuation of the current fiscal unity regime with the existing emergency measures and expansion of the repair measures if necessary. This means that the members of the fiscal unity are consolidated for tax purposes, while certain regulations will have to be applied as if no fiscal unity  exists (known as the emergency repair measures).
  2. Complete abolition of the fiscal unity regime without this being replaced by a new tax group regime.
  3. Replacement of the current fiscal unity regime with a new profit or loss transfer scheme. Under a profit or loss transfer scheme, each company belonging to the tax group will have to calculate its own taxable result. Within the tax group, a company may then transfer its profits or losses to another company belonging to the same tax group. Another possibility is that the profits or losses of all the companies in the tax group is assumed by one designated company in the tax group. In this case, there would only have to be one corporation tax return submitted (by the designated company) for the tax group.
  4. Introduction of a cross-border tax group regime with object exemption. The current fiscal unity could remain in effect and some or all of the existing emergency repair measures are abolished.

 

The State Secretary’s letter revealed that the internet consultation received a total of 11 responses. The potential solutions under a. and c. above received the most support.

Next steps

The letter from the State Secretary for Finance and the next steps will soon be debated in the House of Representatives. In addition, the coming period will feature consultations with various organisations from the business community, interest groups and academics on the various potential solutions for a new tax group regime.

Any abolition of the current fiscal unity regime and the introduction of a new tax group regime will however take several years to materialise. An extensive and significant change to the law of this kind would entail a complex legislative process. Given the current situation, the design of a legislative proposal will therefore be left to a subsequent administration.

More information

If you have any questions, please do not hesitate to contact your regular contact person at Joanknecht or one of our specialists .



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