Transactions between head office and branch in scope of VAT in case of VAT group


As a result of the Danske Bank judgment, more specifically the strict interpretation given in that case by the European Court of Justice (‘CJEU’) to the territorial scope of the VAT grouping regime the State Secretary of Finance has decided to amend the Dutch Fixed Establishments Decree (no. 2020-25513, hereafter: ‘Decree’). Based on the Decree, transactions between a head office and its branch will be in scope of VAT in case one of the establishments is part of a VAT group. The amendment comes into effect on 1 January 2024.


In the Danske Bank judgment, the CJEU ruled that the VAT grouping regime of Article 11 of the VAT Directive has a limited territorial scope. According to the Dutch State Secretary, this means that taxable persons can only form part of a VAT group in so far they are established within the territory of a Member State. This means that only a head office established in the Netherlands is part of the Dutch VAT group, without its fixed establishments outside of the Netherlands. Furthermore, taxable persons established outside the Netherlands can only be part of the Dutch VAT group with a fixed establishment established in the Netherlands. The foreign head office is not part of the VAT group.


In a number of Member States, including the Netherlands and also Ireland, the text of the VAT group as laid down in Article 11 of the VAT Directive (at least until the Danske Bank judgment) was interpreted as meaning that a foreign (legal) person with a (secondary) establishment in the Netherlands, such as a fixed establishment, may be included in the VAT group as a whole (thus including the part(s) established outside the Netherlands). As a result, the reasoning of the Danske Bank case was not applied. The Dutch interpretation relied on a Supreme Court ruling of 14 June 2002. According to the Dutch State Secretary, as a result of the CJEU case law this judgment has lost its relevance for the assessment of the scope of the VAT group in the Netherlands.

What does this mean for your business?

The amendment of the Decree has direct consequences for taxable persons that are established in different jurisdictions by means of a head office and fixed establishment structure, and of which either the head office or the fixed establishment is part of a VAT group. The Dutch State Secretary states that in such a case, supplies between a fixed establishment and head office are VAT taxable.

The change to the Dutch VAT group regime as per 1 January 2024 could have a significant (financial) impact. We recommend a careful assessment of the potential impact for your business. This applies both to the impact for establishments in the Netherlands as  to establishments in other Member States. Since the supplies will become VAT taxable, reverse charge VAT may be due in The Netherlands for charges of (a) foreign establishment(s) to Dutch establishment(s). Furthermore, the change may affect the right to deduct input VAT in case Dutch establishment(s) charge amounts to establishment(s) outside of the Netherlands.

We point out that the State Secretary assumes that a change in the Dutch VAT act is not necessary with this amendment. In tax literature this approach is doubted. It is very well conceivable that this question will be put to the court by one or more parties. This would imply that you would have to take a period of uncertainty into account regarding the exact consequences of this amendment. 

It is important to prepare your business for the impact of the change of the Decree as of 1 January 2024. Relevant topics are the implementation of the VAT in your systems, the invoicing flows and monitoring and managing the potential financial consequences. The fact that supplies between establishments will be in scope of VAT as of 2024, does not mean that all charges will result in VAT consequences. It for instance needs to be determined if for all transactions there is a remuneration for a supply for VAT purposes and/or if it may be possible to apply a VAT exemption on (part of) the transactions.

Please feel free to contact your regular PwC advisor or one of the contact persons below for more information.


Contact us

Joost Vermeer

Joost Vermeer

Partner, PwC Netherlands

Tel: +31 (0)61 219 58 86

Kim Carton

Kim Carton

Senior Manager, PwC Netherlands

Tel: +31 (0)61 274 95 69

Edwin van Kasteren

Edwin van Kasteren

Director, PwC Netherlands

Tel: +31 (0)61 093 42 58

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