What Is a Cost-Sharing Group (CSG) and Why It Matters in the Netherlands?

If you operate a micro or small enterprise in the Netherlands, especially in healthcare, education, or VAT-exempt sectors, you’ve likely heard whispers about Cost-Sharing Groups (CSGs). These arrangements allow several VAT-exempt organizations to jointly procure essential services, like cleaning, HR, or IT, without triggering VAT, provided the services are "directly necessary" for each member’s exempt operations.  

Why does this matter? Large institutions often perform these services in-house VAT-free. Smaller businesses can’t, unless they form a compliant CSG. The VAT exemption levels the playing field, empowering smaller players to collaborate and remain operationally competitive.

The Catch: No “Distortion of Competition” Allowed

Under EU VAT law, the CSG exemption only applies if it doesn’t distort competition. But what does "distortion" mean in practice?

On July 10, 2025, Advocate General Kokott delivered a game-changing opinion in joined cases C‑379/24 and C‑380/24, providing long-awaited clarity. While the final ECJ ruling is pending, AG Kokott’s opinion is highly influential and sets practical guardrails for businesses using the exemption.

Key Takeaway: Real Necessity, Real Cost = No Distortion

If your CSG:

• Provides services strictly necessary for VAT-exempt activities,
• Charges only actual incurred costs, with no mark-up or profit,
• And limits activity to its own members,

Then you’re not distorting the market—you’re just replicating what large competitors can already do internally without VAT.

But if your CSG:

• Sells services externally to third parties,
• Passes through outsourced services without operational value,
• Or sets up cross-border structures purely for VAT optimization,

Then you risk violating the rule, and the VAT exemption can be denied.

How the 2025 Opinion Impacts Dutch Micro & Small Enterprises

1. Collaboration Is Legitimate, Within Clear Limits

The AG’s opinion reassures Dutch entrepreneurs that forming a CSG is legitimate when:

• Services are essential to VAT-exempt operations.
• No services are offered to non-members.
• Charges reflect pure cost, not disguised margin.

2. Outsourcing Doesn’t Kill the Exemption

Tax authorities often argue that outsourcing disqualifies the exemption. The AG disagrees: who performs the service is less relevant than whether the service is objectively necessary and fairly priced.

Caveat: VAT on outsourced components still applies, but the CSG exemption remains intact if structured properly.

3. Watch for Abuse Indicators

To avoid revocation of the exemption, steer clear of these red flags:

• Supplying non-members.
• Acting as a pure VAT pass-through.
• Creating foreign entities just to gain tax advantages.

These are classic signs of manipulation, not collaboration.

4. Substance Over Structure: Documentation Is Key

Your documentation must clearly demonstrate:

• The necessity of each service.
• The internal logic of cost allocation.
• That all services are genuinely tailored to members’ exempt activities.

If it looks engineered for VAT savings alone, expect scrutiny.

Action Plan for Dutch Entrepreneurs Using CSGs

The Exemption Exists to Protect, Not to Game

The CSG VAT exemption is a regulatory instrument designed to ensure fair competition, not a loophole for arbitrage. Used honestly, it allows small and micro businesses to collaborate efficiently. Used opportunistically, it may result in audit, penalties, or denial of the exemption.

As micro-enterprises become more networked and agile, staying compliant means understanding intent, structure, and documentation, not just the letter of the law.

Stay clean. Stay clear. Play the long game.