Fiscal unit

If a corporate income taxpayer has a legal and economic interest of at least 95% in the share capital of another company, there may be a fiscal unity for corporate income tax purposes. With a fiscal unity, all entities in that unity are considered one taxpayer for tax purposes. One of the advantages of this is that losses of one group member can be set off against the profits of another group member. This thus avoids having to pay tax for one company while there are losses at another company that cannot be set off against profits. This provides an advantage in terms of liquidity.

There are also disadvantages to a fiscal unity. This is because the whole group is liable for tax. Also, the reduced rate of the first bracket cannot be used per company.

A fiscal unity requires that the financial years run parallel and do not end on different dates. If the financial years are not parallel, this will have to be adjusted via an amendment to the articles of association.

For more information on the advantages and disadvantages of a fiscal unity, please contact us. We will be happy to advise you.