Treaty Application for Companies in a Group (FM nr. 178) 2022/5.2.5:5.2.5 Interim conclusion: existing group taxation regimes

Treaty Application for Companies in a Group (FM nr. 178) 2022/5.2.5

5.2.5 Interim conclusion: existing group taxation regimes

Documentgegevens:

L.C. van Hulten, datum 06-07-2022

Datum: 06-07-2022
Auteur: L.C. van Hulten
JCDI: JCDI:ADS659509:1
Vakgebied(en): Omzetbelasting / Plaats van levering en dienst

The preceding section can be summarized as follows:

	Goal	Domestic or worldwide	Variant group approach?	Requirement	Consequences group approach (or the lack of it) with a view to prevent double taxation/tax avoidance?
Group contribution system	Achieve more legal form neutrality	Generally, domestic	Partial group approach	Various ownership percentages	Positive, leads to less economic double taxation as losses can be utilized and to less juridical double taxation as often no withholding taxes are levied. However, contributes to legal form neutrality to a limited extent
Group relief system	Achieve more legal form neutrality	Generally, domestic	Partial group approach	Various ownership percentages	Positive, leads to less economic double taxation as losses can be utilized and to less juridical double taxation as often no withholding taxes are levied. However, contributes to legal form neutrality to a limited extent
Partial consolidation	Achieve more legal form neutrality	Generally, domestic	Partial group approach	Various ownership percentages	Positive, leads to less economic double taxation as losses can be utilized and to less juridical double taxation as often no withholding taxes are levied. Contributes to legal form neutrality more than a group contribution or group relief system
Full consolidation	Achieve more legal form neutrality	Generally, domestic	Full group approach	Various ownership percentages	Positive, leads to less economic double taxation as losses can be utilized and to less juridical double taxation as often no withholding taxes are levied. Contributes to legal form neutrality more than a group contribution or group relief system

Intra-group legal transactions are recognized for corporate tax purposes in a group contribution regime and a group relief regime. The consolidation regime is the only regime that recognizes the group as a single taxable entity and thus leads to the most legal form neutrality. The fact that the group taxation regimes are generally solely applicable in a domestic context, means they only contribute to legal form neutrality to a limited extent.

For most group taxation regimes there is limited concurrence with tax treaties. As group taxation regimes are generally solely applicable on a domestic level, there is no issue. Mainly for full consolidation regimes this is different. A full consolidation regime can influence whether or not an entity is seen as a tax resident. Additionally, a group taxation regime that applies on a cross-border basis can conflict with tax treaties.

Taking a group approach at a tax treaty level, as is done in a national context, is in line with the goals of the OECD MTC. However, it would not fit within the current treaty framework. Therefore, a comprehensive solution would be required. This will be discussed further in chapter 6.