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Revised VAT Deduction Criteria and Updated Grouping Rules Announced by the Dutch Ministry of Finance.
INTRODUCTION
The Dutch Ministry of Finance has introduced new VAT regulations for holding companies, effective July 1, 2025. These updates, outlined in two policy decisions (nr. 2024-13975 and nr. 2024-13987), redefine VAT deduction rules and grouping criteria.
The revised framework aims to align Dutch VAT rules with the latest EU case law, offering clarity while ensuring better compliance for businesses operating internationally.
SECTION 1: KEY CHANGES IN VAT RULES
A Revised Framework for Holding Companies
The new rules draw a clear line between “passive” and “active” holding companies.
Passive holdings, which merely hold shares without taxable activities, will remain outside the VAT system and will no longer have access to VAT deductions.
However active holdings that engage in subsidiary management and charge appropriate fees will qualify as VAT entrepreneurs, but under updated deduction criteria.
Repeal of Legacy Policies
Two longstanding guidelines are set to be repealed:
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The 1991 Holding Resolution: Previously allowed broader VAT recovery for active holdings, which sometimes conflicted with EU law.
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The 2004 Sale of Shares Guidance: Provided flexibility in deducting VAT on share-related costs, now replaced with more precise conditions.
SECTION 2: VAT DEDUCTION – UPDATED RULES
Eligibility Based on Cost Classification
Under the new framework, the deductibility of input VAT depends on the purpose of incurred costs:
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Costs for Taxable Activities: Fully deductible.
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Costs for Exempt Activities: Non-deductible.
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Overhead Costs: Deduction calculated using a pro-rata formula based on taxable and non-taxable activities.
IMPACT ON SHARE TRANSACTIONS
VAT on costs related to share transactions, such as sales or restructuring, will be treated with greater clarity:
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Selling shares within the EU: Costs will generally be non-deductible.
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Selling shares outside the EU: Some deductibility may apply.
Businesses involved in restructuring or share transactions should carefully analyse these implications to optimize their VAT position.
SECTION 3: UPDATED VAT GROUPING RULES
Inclusion of Management Holdings
- The new rules allow holding companies with a steering or policy-making role to join a VAT group, but only after obtaining approval from the Dutch tax authorities.
Intermediate Holdings
- For the first time, intermediate holding companies are also eligible for VAT grouping under the updated criteria, provided they meet the necessary requirements.
SECTION 4: WHAT BUSINESSES NEED TO DO
These updates require businesses to:
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Review VAT Positions: Analyse the impact of the new rules on restructuring, share transactions, and VAT grouping.
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Adjust Compliance Strategies: Ensure adherence to the updated criteria to avoid penalties.
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Seek Expert Advice: Consult VAT specialists to optimize tax strategies and mitigate risks under the new framework.
CONCLUSION
The new VAT rules for holding companies represent an important shift in Dutch taxation policies, while providing clarity, the updated criteria for deductions and grouping require businesses to adjust their tax strategies, with the changes taking effect on July 1, 2025, companies are encouraged to prepare in advance to ensure compliance and optimize their VAT treatment.
For further details, refer to the official Dutch Ministry of Finance publications or consult your tax advisor.
