- Currently, internationally operating companies with fixed establishments in other countries are exempt from VAT for transactions with their head office.
- However, starting January 1, the Netherlands will change its policy, making foreign establishments ineligible for inclusion in a Dutch VAT group if they belong to a VAT group in another EU country.
- This change aligns with the European Court of Justice decisions in the Skandia and Danske Bank cases, treating fixed establishments and head offices as separate taxable persons for VAT purposes if they are part of a VAT group in their country of establishment.
- Transactions between a head office and its fixed establishment will now be subject to VAT if either or both belong to a VAT group within the EU.
- Businesses should assess the impact of these changes, update their systems, and consider potential new reporting and compliance obligations, as other EU countries may have aligned or are aligning their legislation with these decisions.
Source Bloombergtax
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