Supreme Court ruling of 9 November 2012, nr. 11/03524, LJN: BU7276  

A VAT group is assumed in the event that all material requirements to qualify as such are met. The Dutch VAT act provides the possibility to request for a VAT group as well. Such a request is often done in situations in which there is no certainty regarding the qualification as a VAT group and will only be granted if the material requirements are met.

The tax authorities decide on such a request by means of a decree. The VAT liability that each of the VAT group members will (jointly and severally) follow from this decree. Based on Dutch case law, the absence of such a decree will (in principle) exclude the (joint and several) liability.

In the case at hand, a sole director and shareholder of a Dutch BV and the BV were granted a request for a VAT group in 2003. The VAT group did not pay the VAT due with regard to the periods August and September 2005. The sole director and shareholder of the Dutch BV and the BV were each held liable for the unpaid VAT.

However, the sole director and shareholder of the Dutch BV and the BV referred to the (Van der Steen) judgment of the CJEU of 18 October 2007, C-355/06, stating that it is clear that the sole director and shareholder of the Dutch BV does not qualify as a taxable person and, as a result, the latter and the BV have never actually met the conditions to be regarded as a VAT group. As a result, they cannot be held liable for the unpaid VAT.

In response, the Dutch Supreme Court ruled that the VAT liability that follows from the decree granted as a result of the request for a VAT group, also exists during the period in which the circumstances changed, and the material conditions for the existence of a VAT group are no longer met. According to the Supreme Court, the joint and several liability exists until the tax authorities are informed of the fact that the VAT group no longer exists. Even if the material conditions for a VAT group have never been fulfilled, the VAT group members will be held jointly and severally liable for the VAT due.

This means in practice that, in order to prevent joint and several liability, VAT group members should inform the tax authorities in due time that the material conditions for a VAT group are no longer met.