On 19 September 2023, the Dutch Ministry of Finance published its 2024 Tax Plan (Belastingplan 2024). Because of the outgoing administration, no politically sensitive topics are included, but still the 2024 Tax Plan consists of fifteen different proposals of law with three overarching policy goals, being (i) balancing revenues and additional spending through targeted tax measures, (ii) taking steps towards a better and simpler tax system and (iii) contributing towards climate goals and business climate. Most provisions of the 2024 Tax Plan are supposed to enter into force on 1 January 2024 (unless otherwise indicated).
Note that the below proposals are currently subject to parliamentary review and are therefore subject to change. It is already announced that, as part of the current parliamentary review, more details will follow with respect to the anti-dividend stripping rules through a subsequent amendment.
In this note, we discuss the topics that we feel are most relevant to the (inter)national business community:
No changes to the main Dutch tax rates
Contrary to previous years, no amendments are proposed to the Dutch corporate income tax (CIT) rates: The first bracket applies to taxable amounts up to € 200,000 and the rate remains at 19%. Companies will pay the top CIT rate of 25.8% on those taxable amounts over € 200,000. As to the Real Estate Transfer Tax (RETT) tariff, a 2% rate applies to residential property for own use and as of January 1, 2023, the 8% RETT tariff was increased to 10.8%. Both tariffs will remain unchanged in 2024. Also the VAT rates (21%) will not be amended.
No changes to earnings stripping rules
The earnings stripping rules are a generic interest deduction limitation rule included in the CIT. The government intends to abolish the current threshold of EUR 1 million for companies that rent out real estate to third parties. This measure was initially expected to be part of the 2024 Tax Plan, but it is now expected that such measure will be included in next year’s Tax Plan. Consequently, this change is not expected to enter into force before 1 January 2025.
Limitations for individuals investing in Fund for Joint Account (FGR) and Exempt Investment Institution (VBI)
This proposal adjusts the definitions of the Dutch Fund for Joint Account (fonds voor gemene rekening; FGR) and the Dutch Exempt Investment Institution (vrijgestelde beleggingsinstelling; VBI), which are both vehicles sometimes used to structure real estate investments. For FGRs, the consent requirement (toestemmingsvereiste) will no longer be decisive when verifying the tax status of the FGR, but instead the status of an FGR will depend on the concept of “Fund for Joint Account” used in the Dutch Financial Supervision Act (Wet op het financieel toezicht; WFT). Similarly, the definition of the VBI will be aligned with the definition of “Investment Institution” as described in the WFT. The proposed amendments aim to prevent individuals (primarily high net worth individuals and wealthy families) from using these schemes to avoid Dutch taxation and should bring both regimes more in line with their original objectives.
Change to the RETT concurrence exemption
The acquisition of Dutch real estate assets is generally subject to Dutch 10.4% RETT. At the same time, such acquisition could be subject to VAT if for instance that real estate asset is considered ‘new’ (<2 years) for Dutch VAT purposes or if the asset qualifies as building plots (bouwterrein). To prevent this double taxation, a RETT concurrence exemption (samenloopvrijstelling) can be applied by the buyer of Dutch real estate assets, resulting in a RETT exemption.
When acquiring Dutch real estate (or a substantial interest in a real estate-rich (generally 50%), the buyer will generally be subject to 10.4% RETT on the value of the (underlying) real estate. However, given that the transfer of shares is not subject to VAT, there may be situations where neither VAT nor RETT is levied.
The Ministry of Finance considers this undesirable. As such, the Ministry wants to solve this non-taxable event by abolishing the concurrent RETT exemption for share transactions. The proposal will only apply to assets and projects that started after 19 September 2023. Transactions for which parties signed an intention agreement before this date will not be impacted by the legislative changes. However, the RETT position of new transactions will need to be carefully considered.
Dutch entity tax classification rules (as of 2025)
Originally, the Dutch Ministry of Finance intended changing the Dutch entity classification rules as of 1 January 2022 to reduce mismatches with foreign entity classification rules. This was in relation to the classification of Dutch and foreign entities as either tax-transparent or opaque.
Currently new entity classification rules are proposed, consisting of two methods:
- Fixed method (for entities resident in the Netherlands): A non-Dutch entity that is resident in the Netherlands and whose legal form is not comparable to that of a Dutch entity will always be classified as non-transparent and therefore independently subject to tax.
- Symmetrical method (for entities resident outside the Netherlands): The Netherlands will follow the classification made by the foreign jurisdiction for non-Dutch-resident entities incorporated or entered into under foreign law that are not comparable to a Dutch entity and that either own an interest in a Dutch entity or in which a Dutch entity owns an interest.
The new Dutch entity tax classification rules are effective from 1 January 2025. Certain transitional arrangements will be introduced as of 1 January 2024, which should allow funds for joint account, open limited partnerships and the participants in such entities to restructure tax-free during 2024.
This may amongst others impact Dutch – German structures in which German KG’s are involved, which currently qualify as non-tax-transparent for Dutch tax purposes if KG interests may not be transferred without the consent of all partners. As from 2025, any KG will in principle be considered tax transparent for Dutch tax purposes. Please note that the status change from non-transparent to transparent is considered a deemed disposal of the assets owned by the KG for Dutch tax purposes (i.e. a taxable event).
No “FBI” (REIT) regime for Dutch real estate investments (as of 2025)
As of 1 January 2025, the government will introduce a measure in CIT on the basis of which Dutch fiscal investment institutions (FBIs) are no longer allowed to invest directly in Dutch real estate. This means that any income or profits that such FBI derives from the direct ownership of Dutch real estate investments will generally become subject to Dutch CIT at the regular rates. (A fiscal investment institution will still be able to own direct investments in non-Dutch real estate and indirect investments in Dutch real estate owned by a non-exempt taxpayer.)
This real estate measure will have a large impact on existing FBIs. The government recognised that some FBIs may want to restructure their real estate investments in advance and such restructuring could become subject to real estate transfer tax (RETT). To avoid this levy, the government is proposing a temporary exemption from RETT to allow affected FBIs to restructure. This temporary exemption will be valid from 1 January 2024 to 31 December 2024. Conditions apply in order to qualify for this exemption.