The State Secretary of Finance announced in December 2024 to repeal the so-called 'Holding Resolution' and the 'sale of shares' Decree as of July 1, 2025. From this date, the amended 'sales tax deduction' Resolution and the new 'tax liability and fiscal unity' Resolution will take effect.
The new decrees introduce several changes, including the conditions for the inclusion of an (intermediate) holding company in a VAT fiscal unity and the (stricter) policy for VAT deduction in share transactions These changes have potentially major consequences for holding companies.
In this news item we explain in outline.
New decision on tax liability and fiscal unity
Based on the current 'holding resolution', (top) holding companies that are not VAT entrepreneurs can still be included in a fiscal unity VAT on request, if they exercise a policy-making and steering role in the group.
This approval is extended to intermediate holding companies in the new 'tax liability and fiscal unity' decree. In addition, the new decree sets the condition that holding companies that do not qualify as VAT entrepreneurs must meet the so-called 'interdependence requirements' from July 1, 2025 in order to be included in the fiscal unity.
Adjusted sales tax deduction decision
Under the current 'sale of shares' decree, active holding companies can, under certain conditions, deduct VAT on costs related to share transactions. This decision will expire on July 1, 2025.
The amended 'sales tax deduction' decree brings the VAT rules for the right to deduct in share transactions (think buying, holding and selling shares) in line with European case law. To determine whether the VAT on such costs can be deducted, we believe the following step-by-step plan can be applied.
Step 1: Are the shares involved in the share transaction held by a VAT-registered business?
A stock transaction takes place in the capacity of a VAT-registered business in the following situations:
- Shares are held by a holding company that intervenes in the management of its participation for a fee (e.g. providing management services);
- The shares held constitute a direct, permanent and necessary extension of the economic activity of the holding company; or
- A holding company trades shares and other securities on a business basis.
Step 2: is VAT on expenses in share transactions deductible?
Deduction of VAT on costs when buying and holding shares
If the purchased/held shares are held in the capacity of a VAT-registered business (see step 1), the VAT on costs attributable to the purchase or holding of shares is (partially) deductible under certain conditions. The VAT deduction is determined based on the company’s pro rata share. This is calculated by examining the ratio of VAT-taxable activities to total VAT activities. If the costs are partially attributable to shares that do not fully fall within the scope of the VAT business, the right to deduct must be (further) limited.
Deduction of VAT on costs when selling shares
First of all, it must be determined whether the costs incurred qualify as direct costs or general costs with respect to the share transaction. If the costs qualify as direct costs, the VAT on these costs is not deductible, unless the buyer of the shares is located outside the EU. With respect to the costs of selling shares, the decision specifically distinguishes between costs incurred before the share sale and costs incurred afterwards. Costs incurred before the share sale qualify as direct costs if they are incurred solely for the purpose of the share sale (as a result of which the VAT on these costs is not deductible). Expenses incurred after the share sale qualify as general expenses, provided these expenses were not incurred solely for the purpose of the share sale. If they are general expenses, the VAT is (partially) deductible on the basis of the pro rata of the company under certain conditions.
Unfortunately, the new decision remains unclear on several points. For example, how to determine whether expenses were incurred before or after a share sale? We expect that holding companies, especially when selling shares, will have to deal with non-deductible VAT in more situations.
Closing
The new resolutions come into effect from July 1, 2025, and may have a major impact on entrepreneurs with holding companies. If you are currently using the holding resolution and/or you are planning to buy or sell shares, it is important to consider this in time and map the impact on your organization.
Should you have any questions about your specific situation as a result of this news item, please contact us at 040 - 2 504 504 or at btw@govers.nl. We would like to think with you about the impact of these changes for your company.