Tax entity: cancel or maintain

tax entity

Do you have several private limited companies in the Netherlands which are affiliated with each other? Then it may be profitable to regard these companies as a tax entity for corporation tax.

A tax entity for corporation tax

A tax entity offers the possibility to regard companies which are affiliated with each other in a group (at least 95% shares and/or voting rights) as one taxpayer for the Corporation Tax Act 1969.

Advantage tax entity

The advantage of a tax entity is that profits and losses can be set off against each other during a financial year (between companies of the entity). Corporation tax is then calculated on the balance of the profit of the group.

Advantages tax entity with profit

However, a tax entity may also have disadvantages. For example, when all companies of the entity make a profit. The profit up to € 200,000 will be taxed at 20%. The profit above € 200,000 will be taxed at 25%. When all companies of the entity make a profit a rate of 25% applies. By cancelling the tax entity, a rate again of 20% over the first € 200,000 of profit can apply again to each company that used to belong to the entity. This is a result of the fact that all companies will become subject to taxation again on an individual basis.

Tax corrections

Attention: before you proceed with cancelling the tax entity, it must be checked first whether a cancellation does not result in tax corrections. Corrections will apply, amongst others, when assets have been moved between companies within the tax entity during the last 8 years.

Bankruptcy

A tax entity can also have negative effects when a company of the entity goes bankrupt. After a bankruptcy the Tax and Customs Administration has far-reaching powers to set off tax refunds of companies within the tax entity against debts of the bankrupt company.

Tax entity: cancel or maintain

It is advisable to assess every year whether a tax entity is required. If there is a tax entity, we advise you to consider every year whether cancelling the entity may have certain advantages. Your consultant of Accon International may advise you for your specific situation.

For questions about this subject please contact one of our consultants of Accon International or complete the form below for more information.

Contact form

  • This field is for validation purposes and should be left unchanged.


<< back to Expertise