On 12 June 2014, the European Court of Justice issued its decision stating that the Netherland's fiscal unity regime is not compliant with EU Law because it violates the principle of freedom of establishment.

Under the Dutch fiscal unity regime, group companies are allowed to file a consolidated tax return. However, there are two limiting rules of the regime relevant to the case, which are:

• When forming a fiscal unity, companies resident in other EU Member States may only be included if they have a permanent establishment (PE) in the Netherlands; and
• When forming a fiscal unity, all intermediary companies must be included

As a result of these two rules, requests for fiscal unity have been denied in the following situations:

• Fiscal unity between a Dutch parent and a Dutch sub-subsidiary when the sub-subsidiary is held by one or more intermediaries resident in other EU jurisdictions without a PE in the Netherlands
• Fiscal unity between multiple Dutch subsidiaries when they share a parent company resident in another EU jurisdiction without a PE in the Netherlands

The ECJ held that the denial of forming a fiscal unity in those situations was in violation of EU law because of the restriction based on intermediaries or parent company not being established or having a PE in the Netherlands.

Although the fiscal unity would have been denied in the first situation even if the intermediary was established in the Netherlands, that was not a factor in the decision. Furthermore, the decision does not imply that non-Dutch residents should be allowed to be included in a Dutch fiscal unity, but rather that the Dutch companies should be allowed to consolidate regardless of the residence/PE status of an EU parent or intermediary.