Recently, the State Secretary of Finance published a new and a revised Decree with potentially significant implications for the VAT position of Dutch businesses and particularly companies with extensive group structures and (private equity) investors in the Netherlands. We would like to inform you about the relevant changes and how they may affect your organisation. These changes take effect as of July 1, 2025.

We have outlined the most significant changes below:

Approval to include (intermediate) holdings in a Dutch VAT group: 

The decree allows for the inclusion of pure (intermediate) holding companies in a VAT group, even if the entity does not qualify as a VAT entrepreneur. In this regard, it is required that the holding actively contributes to the decision-making related to business operations within the group. The shares must be kept by the holding company as a means of control and responsibility, rather than solely as an investment objective. A written request should be filed to the Dutch Tax Authorities in order to include such holding entity in a Dutch VAT group. 

Share transactions within the scope of VAT: 

The general rule is that the mere holding of shares is not a VAT relevant activity and does not result in VAT entrepreneurship. The revised Decree provides several examples derived from existing case law in which dealings with shares could still fall within the scope of VAT. This applies for example for i) professional share traders, ii) if a legal entity provides services for renumeration to its subsidiary, or iii) when the holding of shares forms an extension of the business. An example mentioned in the decree for category is iii) share transfers related to a (re)structuring. In such cases, the sale/transfer of shares however does not automatically result in an input VAT recovery restriction (we refer to the below) and holding these shares in principle grants the right to deduct the VAT on related costs (i.e. no pre-pro-rata).

Transaction costs and VAT deduction: 

The deductibility of VAT on transaction costs remains a complex issue. The decree indicates, in line with existing case law, that an overall assessment of the costs must be made to determine the VAT recovery right of these costs. This should be based on the timing of the services procured and the objective link between the procured services and the shares transaction. In this respect the following three categories are distinguished in the revised Decree: 

• Costs made prior to the sale of shares: Costs are deemed directly related to the sale of shares. In such cases, VAT is in principle non-deductible unless the buyer is established outside the European Union and the sale of the shares falls within the scope of VAT.

• Costs made after the sale of shares: Costs are not deemed to directly relate to the sale of shares. In such cases, VAT on these costs is in principle deductible in line with the VAT recovery right position of the seller unless the costs exclusively origin from the sale of the shares.

• Not direct attributable costs: These can typically be classified as general costs and will, in principle, be deductible in line with the VAT recovery right position of the recipient.

Sale of shares by corporates versus private equity firms: 

For corporates, the sale of shares does not necessarily result in a restriction of the VAT deduction right, even if the proceeds exceed the turnover from regular activities. Shares held as an extension within a corporate group or VAT group can also fall within this exception. However, private equity firms and related investment/participation companies are treated differently and cannot make use of this exception in the view of the State Secretary of Finance.

The new decree raises many new questions, such as when are shares held as the extension of the business, what moment should be considered when determining when transaction costs being "made" and what is the definition of a private equity-related investment/participation company.  

It also remains unclear how the VAT deduction right should be determined if the holding of shares qualifies as a non-economic activity (the so-called pre-pro rata). In practice, many different allocation methods are applied to calculate the VAT recovery right and this results in widely different outcomes.

Next steps

As mentioned, the above developments are relevant to all businesses operating in the Netherlands and particularly companies with extensive group structures and (private equity) investors in the Netherlands. We therefore recommend carefully assessing the VAT impact on your company.  If you would like to exchange views, please feel free to get in touch with Tim Jansen of A&M Netherlands or your usual A&M contact.