On 5 July 2022 the Dutch State Secretary for Finance announced that the Decree Fixed Establishment for VAT in the Netherlands will be amended. Due to this amendment a cross-border Dutch VAT fiscal unity is no longer possible. This amendment is the result of ECJ case law. The updated Decree entered into force on 1 January 2024. In this update, we will further elaborate on the change and the impact for businesses. 

A basic principle in VAT is that the head office and its fixed establishment are considered as one taxable person for VAT purposes and that the transactions between the head office and its fixed establishment are not subject to VAT (FCE Bank-case). In addition to this basic principle, the Dutch Supreme Court ruled on 14 June 2002 that, if a Dutch fixed establishment is part of a Dutch VAT fiscal unity, its foreign head office is part of the same VAT fiscal unity. Both, the foreign head office and its domestic fixed establishment, are part of the same VAT fiscal unity and are being treated as one taxable person for VAT purposes. Consequently, all transactions between the foreign head office and its domestic fixed establishment would not be in scope of VAT. 

The judgment of the Dutch Supreme Court from 2002 lost however its relevance given the cases Skandia (nr. C-7/13) and Danske Bank (nr. C-812/19) of the EU Court of Justice. The EU Court of Justice ruled that the head office and its fixed establishment are two separate taxable persons for VAT purposes in the following two cases: 

  1. The US head office and its Swedish fixed establishment are located in different countries. The fixed establishment is part of a VAT fiscal unity in the EU country where it is located (i.e. Sweden). 
  2. The Danish head office and its Swedish fixed establishment are located in different countries. The head office is part of a VAT fiscal unity in the EU country where it is located (Denmark). 

It seems that the VAT fiscal unity is limited in cross-border scenarios according to the EU Court of Justice. Transactions between the head office and its fixed establishment are subject to VAT if one of these two is part of a VAT fiscal unity in an EU country. By amending the Decree, the Dutch State Secretary of Finance aims to align the Dutch policy with the abovementioned rulings of the EU Court of Justice. The amendment to the Decree Fixed Establishment takes effect on 1 January 2024. 

Review whether the amended Decree Fixed Establishment has impact 

The amendment could result in (new) reporting obligations and limitations of deduction of input VAT. Therefore, we strongly recommend to review whether your business is impacted by this Decree and to what extent. If you would like to discuss whether the amendment of the Decree Fixed Establishment might impact your business, please contact your RSM tax advisors.