On 24 April 2026, the Dutch Supreme Court ruled in ECLI:NL:HR:2026:713 that a VAT group does not erase the contracts of its members when it comes to bad debt relief.
The case
Two companies belonged to the same Dutch VAT group. One sold phone subscriptions to consumers. Consumers could also buy a handset, if desired on credit. The credit came from the other company and was charged in monthly instalments. Some consumers stopped paying. The group wanted to reduce its VAT by the VAT on the unpaid instalments.
The Court of Appeal of The Hague agreed. It considered that it did not matter which company supplied the handset, because both were part of a VAT group.
The ruling
The Supreme Court set that aside. Bad debt relief under Article 29(1) of the Dutch VAT Act requires a direct link between the unpaid amount and the supply. A VAT group does not enter into contracts with third parties. Its members do, and those contracts show what the customer has to pay for, and why.
The relief is therefore available only if, under the contract with that customer, the unpaid claim is the consideration directly linked to the supply on which the group charged and paid VAT. The Supreme Court saw no reasonable doubt on this point, so it did not refer the question to the Court of Justice. The case now goes to the Court of Appeal of Amsterdam.
What to check
- If one group member sells and another finances, look at what each contract says the customer pays for.
- Treating a VAT group as one taxable person does not mean that every internal arrangement falls away for this purpose.
- Review bad debt claims made on a group-wide basis.
mr. J. el Khalfioui LL.M.