Treaty Application for Companies in a Group (FM nr. 178) 2022/6.2.2.1:6.2.2.1 Introduction

Treaty Application for Companies in a Group (FM nr. 178) 2022/6.2.2.1

6.2.2.1 Introduction

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The recognition of corporate groups is normally limited to in-country situations. Sometimes transactions between group members are ignored (via consolidation). Additionally, corporate groups are often allowed to enter into transactions that are not possible for other companies (such as loss transfers).1 If losses can be taken into account within a corporate group (across borders), this has a positive effect on the neutrality of the tax system.2 Apart from that, there are various rules that link negative consequences to being part of a group (e.g., CFC rules). However, the starting point is and remains the separate entity. In today’s economy, which is increasingly characterised by internationalisation and digitalisation, taxation based on separate legal entities is no longer obvious. After all, group companies cannot be compared to independent entities. There are synergy benefits in the case of group companies. It therefore does not seem logical to tax these companies as independent legal entities.3 Therefore, taxation on a group basis is more in line with economic reality: a single economic entity from an economic perspective is seen as a single entity for tax purposes.4

Treating a multinational group as a taxable entity would mean all legal transactions within the firm would be ignored. In this regard it should be determined where the ultimate parent company of the group is located, which would be the main taxpayer.5 The residence of a group entity from a legal perspective would have no meaning.6 This would eliminate double taxation as well as tax avoidance possibilities, which would contribute to achieving the OECD MTC objectives. Under a worldwide unitary taxation system, most of the issues identified in the previous chapters would no longer be a problem from the perspective of groups of companies. For the issues for groups of companies discussed in the previous chapters, a full group (i.e., unitary business) approach would mean that:

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cross-border loss compensation would be possible;

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intra-group transactions would not result in profits or losses being taxed;

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there would be no withholding taxes on dividends in intra-group situations, nor taxation of received distributed profits;

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interest payments and royalties in intra-group situations would not be visible;

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mergers, divisions, partial divisions, transfers of assets and exchanges of shares within groups of companies would not be visible;

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exit taxes, CFC rules and anti-hybrid rules would not be necessary for group entities; and

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national group taxation regimes would be redundant.

The integral introduction of a group concept in domestic tax law, in which the worldwide group is included in the levy, entails both positive and negative elements. If a unitary business approach is chosen, it is particularly positive that the legal design of a group is no longer relevant. The group concept is in line with economic reality and various existing provisions are no longer necessary. Fiscal consolidation of groups of companies can lead to simplification of domestic tax systems. At the moment, those tax systems contain various provisions that attempt to prevent the distortions of a levy based on legal independence. Those provisions would no longer be necessary.7 A negative element is the fact that there are various new issues to be dealt with. Those issues will be discussed in the remainder of this section.

Deze functie is alleen te gebruiken als je bent ingelogd.