Treaty Application for Companies in a Group (FM nr. 178) 2022/2.4.4.4:2.4.4.4 Interim conclusion: the group concept in national tax law

Treaty Application for Companies in a Group (FM nr. 178) 2022/2.4.4.4

2.4.4.4 Interim conclusion: the group concept in national tax law

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 schemes discussed can be represented schematically as follows:

Group definition

Purpose of the scheme

Legal feature of group concept (main rule)

Economic feature of group concept

Scope

Direct and/or indirect interest

Start/end

Group taxation regimes

Provide loss compensation possibilities and facilities for intra-group asset transfers

Various ownership percentages

N/A

Incorporated legal entities and permanent establishments

Direct and indirect interest

As soon as the definition is met or is no longer met and generally only if the taxpayers elect for application of the regime

Unitary business approach

Protect against profit shifting between states and reduce administrative issues

N/A

A functional integration, the centralization of management and economies of scale

All legal entities

Direct and indirect interest

As soon as the definition is met or is no longer met

For legal entities a group concept is used in all kinds of situations to promote legal form neutrality. The described group taxation regimes as applied in national tax law contribute to legal form neutrality, but do not achieve it as the scope of application is rather limited. The main problems are the fact that generally mechanical legal rules are applied, as well as that normally solely domestic entities fall within the scope of the rules. Generally, application of a group taxation regime is elective.

Under the unitary business approach a more economic and worldwide approach is taken, which contributes to legal form neutrality. For application of the unitary business approach there should be a sufficient relation between the entities and there must also be a central management. Application of the regime is non-elective. The group concept leads to a system in which there are less tax avoidance opportunities.

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