On Budget Day 2023 (19 September 2023), legislative proposals were published for 2024 and onwards that could impact the real estate and the financial services industries. In this contribution, we included – on a high level – a selection of the most important developments related to Corporate Income Tax (CIT), Real Estate Transfer Tax (RETT) and Value Added Tax (VAT).
Change in classification of legal forms
If legal forms are treated differently in the Netherlands than abroad, this could result in undesirable situations such as double taxation or double deduction. To prevent these situations, as from 1 January 2025, foreign legal forms will be assessed on the basis of the legal form comparison method. In case the legal form comparison method does not provide a solution, the government proposes additional methods (fixed and symmetrical) for the purpose of qualifying foreign entities. No transitional law is proposed.
Expired tax liability open CV
As of 1 January, 2025, open limited partnerships (CVs) are in principle no longer independently taxable, but the result will be taxed at the level of the partners (tax transparency). Foreign legal forms similar to a CV will also no longer be independently taxable as a result. Transitional legislation has been announced to avoid unwanted tax consequences of this change. In addition to CIT and PIT, the transitional law also covers any RETT. This transitional law does not apply to open CVs established after the announcement of this bill.
New condition for FGR
The mutual investment funds (FGR) will only remain subject to CIT if it meets a new condition (i.e. it has to be a qualifying investment fund/fund for collective investment in securities, under the Financial Supervision Act (Wft)). Share ownership must be evidenced by negotiable certificates of participation. An unanimous consent requirement does not prevent marketability.
FGRs not meeting this condition, including family funds, will be deemed to have disposed of their assets to the unit-holders. In order to avoid acute levy and payment of tax, three transitional measures are proposed. Transition law only applies to FGRs that existed on 19 September, 2023, 3:15 p.m. and/or real estate that had already been contributed to the FGR at that time.
The new definition of the mutual fund (FGR) on 1 January, 2025, may be grounds for the Dutch tax authorities to terminate an advance tax ruling (ATR). However, an ATR often also covers other matters not affected by the new definition of the FGR.
Change in the Dutch FII-regime
Fiscal Investment Institutions (FBIs) can opt for the FBI regime under which they are subject to a CIT rate of 0% if they meet certain conditions. As from 1 January, 2025, FBIs are no longer allowed to directly invest in Dutch real estate. As a result, the profits of such an entity will be taxed at the regular
CIT rate. To mitigate the tax consequences, the legislator granted a possibility to restructure in 2024 without RETT due if certain conditions are met.
Revision of RETT and VAT concurrence exemption for share transactions
In practice, real estate is regularly transferred via a share transaction. In the case of new real estate, no VAT and RETT are then due under the concurrence exemption.
It is proposed to amend this concurrence exemption in RETT as of January 1, 2025, in such a way that 4% RETT may become due. The proposed legislative amendment ensures that the concurrence exemption does not apply in certain situations when acquiring a qualifying equity interest (>1/3) in a so-called real estate legal entity.
If the underlying (possibly new) immovable property at the time of acquisition and for 2 years after the time of acquisition is used wholly or almost wholly (i.e., at least 90%) for VAT-taxed services, the concurrency exemption will apply without prejudice.
If less than 90% of the underlying (possibly new) immovable property is used for VAT-taxed services during the aforementioned period, the concurrence exemption does not apply and 4% RETT is due on the acquisition of the qualifying equity interest in an immovable property legal entity.
Announced revision of earnings stripping rule
The intention has been expressed to include the abolishment of the €1 million threshold in the earnings stripping measure for real estate entities with property leased (to third parties) as of 1 January, 2025, in the 2025 Tax Plan.
Less interest deduction for banks and insurers
Banks and insurers face a specific interest deduction limitation: the minimum capital rule. In short, interest owed is not deductible to the extent that loan capital exceeds 91% of the balance sheet total. This limit is reduced to 89.4%.
Evidence position on dividend stripping
The recipient of the dividend must be the beneficial owner to credit, reclaim or reduce dividend tax. Dividend stripping limits, or even prevents, dividend tax liability by having shareholders enter into a series of transactions. A recipient is not considered the beneficial owner if there is dividend stripping. To improve the tax authorities' evidentiary position, it has been proposed that as from 1 January 2024 a person claiming set-off, refund or reduction will now also have to state the facts or, if these are contested by the inspector, make it plausible that he or she is the beneficial owner. An efficiency margin of €1,000 of dividend tax levied on an annual basis applies here. This efficiency margin does not apply when applying the withholding exemption and dividend tax remittance reduction for fiscal investment institutions (FBIs).
With respect to the concept of "series of transactions" in dividend stripping, it has also been proposed that transactions of entities affiliated with the taxpayer or person entitled to revenue should be allocated to the taxpayer or person entitled to revenue. This will determine at group level whether there is a series of transactions.
Energy and environmental investment allowances
To encourage energy investments and investments in environmentally friendly assets, various investment tax credits are available. It has been decided that the schemes energy investment deduction (EIA), the environmental investment deduction (MIA) and the random depreciation for environmental investments will not end on 1 January, 2024 and that these schemes will be extended through 31 December, 2028. The rate of the EIA will be reduced from 45.5% to 40%.
Please note that the proposed measures, if approved in both Houses, will take effect on 1 January, 2024, unless otherwise stated. We will keep monitoring these developments and keep you posted. Should you have any questions, please feel free to reach out to our colleagues at Atlas Tax Lawyers in the Netherlands.
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