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Practical Handbook VAT 2021

Subjective requirements

Entrepreneurs or professionals who are part of a group of entities may apply the special regime for the group of entities.A group of entities is considered to be a group of entities formed by a parent entity and its subsidiaries, which are firmly linked to each other in financial, economic and organisational terms, provided that the headquarters of economic activity or permanent establishments of each and every one of them are located in the territory where the tax applies.


  • Financial linkage" shall be deemed to exist when the parent entity, through an interest of more than 50% in the capital or voting rights of group entities, has effective control over those entities.

  • Economic links" shall be deemed to exist where the entities of the group carry out the same economic activity or where, while carrying out different activities, they are complementary or contribute to the performance of the same activities.

  • Organisational links" shall be deemed to exist where there is a common management of the group entities.

    It shall be understood, unless there is proof to the contrary, that a parent company that fulfills the requirements of a financial relationship also fulfills the requirements of a financial and organisational relationship.

No business or professional can simultaneously form part of more than one group of companies.

A dominant entity is if it meets the following requirements:

  1. It has its own legal personality.The permanent establishments located in the tax's territory of application can also have the condition of parent company.

  2. It has effective control over group entities through a direct or indirect holding of more than 50 per cent of the capital or voting rights.

  3. Said stake must be maintained throughout the calendar year.

  4. It is not a subsidiary of any other entity established in the territory of application of the tax that qualifies as a parent.

Provided that these requirements are met, a commercial company not acting as a trader or professional may also be considered as a parent entity.

A subsidiary is considered to be an entity that is established in the tax territory and in which the controlling entity has a direct or indirect holding of at least 50% of the capital.Said stake must be maintained throughout the calendar year.

Subsidiaries that lose this status are excluded from the group of entities with effect from the settlement period in which this occurs.