Einde inhoudsopgave
Treaty Application for Companies in a Group (FM nr. 178) 2022/5.2.3.3
5.2.3.3 Full consolidation system
L.C. van Hulten, datum 06-07-2022
- Datum
06-07-2022
- Auteur
L.C. van Hulten
- JCDI
JCDI:ADS659464:1
- Vakgebied(en)
Omzetbelasting / Plaats van levering en dienst
Voetnoten
Voetnoten
K. Jain, ‘The OECD Model (2017) and Hybrid Entities: Some Opaque Issues and Their Transparent Solutions’, Bulletin for International Taxation 2019, vol. 73, no. 3, par. 2.3.1.1.
Z.M. Reijn, N. van de Voorde & F.M. van der Zeijden, ‘Tax Grouping in an EU Context: All Roads Lead to Brussels’, European Taxation 2018, vol. 58, no. 7, par. 2.2.4.
K. Jain, ‘The OECD Model (2017) and Hybrid Entities: Some Opaque Issues and Their Transparent Solutions’, Bulletin for International Taxation 2019, vol. 73, no. 3, par. 2.3.1.1.
B.F.A. da Silva, The Impact of Tax Treaties and EU Law on Group Taxation Regimes, Alphen aan den Rijn: Kluwer Law International 2016, par. 6.3.3.2.1.
B.F.A. da Silva, The Impact of Tax Treaties and EU Law on Group Taxation Regimes, Alphen aan den Rijn: Kluwer Law International 2016, par. 6.3.3.2.2. E.g., the Netherlands applies an attribution system.
A. Ting, ‘Policy and membership requirements for consolidation: a comparison between Australia, New Zealand and the US?’, British Tax Review 2005, no. 3, p. 315.
A. Ting, ‘The Unthinkable Policy Option? Key Design Issues Under a System Full of Consolidation’, Canadian Tax Journal 2011, vol. 59, no. 3, p. 434.
In this respect, it is not required to trace asset movements etc., they are ignored fully. If a transferor or transferee ceases to be a group member, no recapture of gains or losses is required (B.F.A. da Silva, The Impact of Tax Treaties and EU Law on Group Taxation Regimes, Alphen aan den Rijn: Kluwer Law International 2016, par. 6.3.3.2.3).
Z.M. Reijn, N. van de Voorde & F.M. van der Zeijden, ‘Tax Grouping in an EU Context: All Roads Lead to Brussels’, European Taxation 2018, vol. 58, no. 7, par. 2.2.4.
S. Princen & M. Gérard, ‘International tax consolidation in the European Union: evidence of heterogeneity’, European Taxation 2008, vol. 48, no. 4, par. 4.3.2.3.
M.F. de Wilde, ‘Sharing the Pie’; Taxing Multinationals in a global market, Amsterdam: IBFD 2017, par. 4.3.1.4.
For a schematic overview of the different systems, please see par. 5.2.5.
Under a full consolidation system, similar to a partial consolidation system, a common tax base is created. Additionally, intra-group transactions are disregarded. Thus, profits and losses between group members can be offset, and gains derived from the intra-group transfer of assets can be deferred.1 As a result, the various group entities are treated as if they are one single entity. This can be the case solely for tax computation purposes, but also for tax payment and tax filing purposes.2
Three different approaches can be distinguished for full consolidation systems: pooling, attribution and absorption.3 A pooling system under a full consolidation system applies in a similar manner as the aforementioned pooling system for a partial consolidation system. The difference is that typically adjustments are made for intra-group transactions. The system combines the separate entity approach and the enterprises approach.4
A system based on attribution basically attributes the assets, liabilities and taxable activities of group members to the parent company of the group. All group members are treated as a single economic unit.5 However, each subsidiary within the group remains subject to taxation.
Application of the absorption system best represents the enterprise approach.6 The subsidiaries of the group are treated as parts of the parent company, rather than as separate entities. The subsidiaries are deemed to have ceased to exist for tax purposes: they become divisions of the parent company.7 Any assets held by the subsidiaries, are deemed to be held by the parent company. No intra-group transactions are visible from a tax perspective.8
The full consolidation system least respects legal personality.9 Legal personality of the group entities is disregarded for tax purposes.10 Therefore, a tax consolidation system reinforces the neutrality of the legal form in corporate taxation.11 From the various variants of full consolidation systems, the absorption system is the most far-reaching.12