DIRECT SALE OF REAL ESTATE 

Resident individual

Capital gains

If real estate qualifies as a business or business asset, capital gains are subject to income tax in box 1 at a progressive rate of up to 49.5%. In this case, purchase costs and development costs are deductible from the capital gains.

If the real estate does not qualify as a business or business asset, capital gains are not subject to income tax. Instead, the real estate falls under the box 3 tax regime. Rather than taxing capital gains, a deemed return is taxed at a flat rate of 36%.

VAT / transfer tax

As a general rule, the acquisition (and therefore the sale) of immovable property are exempt from VAT. However, VAT is charged if a building site or a new building is sold within two years after its first occupation. In such case of the supply of immovable property after this two-year period, under specific conditions, the supplier and the recipient can opt for a VAT-able supply of the property, the applicable tax rate is 21%. Thereby, the supplier and the recipient can opt for a VAT-able supply or lease of the property.

In case VAT is charged because a building site or a newly created building is sold, the transfer of real estate is exempt from transfer tax. In case VAT is charged because a newly created building is sold within two years after its first occupation, under circumstances the transfer of real estate can be exempt from transfer tax. By renting out a property (excluding standard residential rental), you qualify as an entrepreneur for VAT purposes.

Personal Income Tax - losses

Losses on the sale made by individuals without a trade or business are ignored. However, if the real estate is acquired as trading of business inventory, the losses may be offset against other taxable income of the previous three years or the next nine years.

Non-resident individual

Non-resident individuals are treated in the same manner as resident individuals. However, losses arising on the sale of Dutch real estate can only be offset against other Dutch taxable income. 

Resident company

Capital gains

Capital gains on the Dutch real estate are subject to Dutch corporate income tax as business income. Business income up to EUR 200,000 is taxed against a tax rate of 19%. Profits exceeding EUR 200,000 are taxed against a rate of 25,8%. 

The corporate income tax on capital gains is based on the difference between the net sales proceeds and tax book value.

Fiscal unity

Under Dutch law, it is possible to form a fiscal unity if the holding company owns at least 95% of the share capital in its subsidiary (or subsidiaries). Transactions that take place within the fiscal unity are effectively invisible for tax purposes. This means that the transfer of real estate within a fiscal unity is not subject to taxation, as the tax authorities do not recognize the transaction. However, various anti-abuse measures apply if the fiscal unity is dissolved within a certain period after the transfer of real estate within the group.

VAT

As a general rule, the acquisition (and therefore the sale) of immovable property are exempt from VAT. However, VAT is charged if a new building is sold within two years after its first occupation. In case of an acquisition of immovable property after this two-year period, under specific conditions, the supplier and the recipient can opt for a VAT-able supply of the property. The applicable VAT rate is 21%.

In case VAT is charged because a building site or a newly created building is sold, the transfer of real estate is exempt from transfer tax. 

In case VAT is charged because a newly created building is sold two years after its first occupation, under the transfer of real estate is exempt from transfer tax.

Corporate income tax: deferral of tax / reinvestment reserve

Legal entities can, under certain conditions, defer taxation on capital gains by creating a reinvestment reserve (HIR). If reinvestment occurs within three years in a similar business asset, the value of the reinvestment reserve is deducted from the value of the new asset. As a result, future depreciation costs are lower, leading to higher taxable profits in later years due to the deferred tax liability.

If no reinvestment takes place within three years, the reinvestment reserve becomes immediately taxable, without the possibility of further deferral through depreciation costs.

Losses – carryforward and carryback

Losses incurred from the sale of real estate can be offset against all Dutch taxable profits from the previous year and future profits, with no time limitation. If the taxable profit for a year is €1,000,000 or less, it can be fully used to offset a loss from a previous year. If the taxable profit exceeds €1,000,000, only 50% of the profit above €1,000,000 can be used to offset a loss from a prior year. This rule also applies to carryforward losses. 

However, carryforward of losses may be denied if the ultimate ownership of the shares in the loss-making company has changed by more than 30%, causing the losses to expire.

Non-resident company

Foreign legal entities are treated the same way as domestic legal entities, as Dutch real estate held by a foreign company is considered a Dutch business of the foreign legal entity. However, losses can only be offset against Dutch income.

Under certain conditions, it is possible to form a fiscal unity with a permanent establishment located in the Netherlands. However, this is subject to various detailed conditions. INDIRECT SALE (share-deal)

Resident individuals

Capital gains 

If an individual owns less than 5% of the shares in a Dutch company, no tax will be levied on capital gains realised by the sale of the shares. However, if an individual owns at least 5% of the company’s issued share capital a personal income tax will be levied (box 2). The difference between the selling price and the purchase price of the shares will be taxed at a starting rate of 24.50% up to €68.843 and 31% from €68.843.

Transfer Tax

In principle, a share transfer is not subject to real estate transfer tax. However, this is different when it concerns shares in a real estate entity. A company qualifies as a real estate entity if at least 50% of its assets, based on market value, consist of real estate, of which at least 30% is located in the Netherlands. Additionally, the main activity of the entity must involve acquiring, selling, and/or operating real estate. This means that the legal entity's primary objective is to generate at least 70% of its activities from the acquisition, disposal, or exploitation of real estate.

For the transfer of real estate shares, a transfer tax rate of 4%, 8% or 10.4% may apply

Losses

If an individual owns at least 5% of the company’s issued share capital and sell the shares, the proceeds of disposal of the shares are taxed in ‘box 2’. If the disposal of the shares leads to a loss, the loss may be offset against other income taxed in box 2 of the previous year and the next six years.

Non-resident individual

Non-resident individuals are treated in the same manner as resident individuals insofar they derive Dutch taxable income. 

Resident company

Capital gains

Capital gains on the Dutch real estate are subject to Dutch corporate income tax as business income. Business profits up to EUR 200,000 is taxed against a tax rate of 19% . For profits of more than EUR 200,000 are taxed against a tax rate of 25,8%.

The participation exemption applies when a Dutch company sells shares in another Dutch company in which it holds an interest of at least 5%. The profits gained from the sale of shares are exempt from corporate income tax.

Fiscal unity

Under Dutch law, it is possible to form a fiscal unity if the holding company owns at least 95% of the share capital in its subsidiary (or subsidiaries). Transactions that take place within the fiscal unity are effectively invisible for tax purposes. This means that the transfer of real estate shares within a fiscal unity is not subject to taxation, as the tax authorities do not recognize the transaction. However, various anti-abuse measures apply if the fiscal unity is dissolved within a certain period after the transfer of real estate within the group.

Transfer Tax

In principle, a share transfer is not subject to real estate transfer tax. However, this is different when it concerns shares in a real estate entity. A company qualifies as a real estate entity if at least 50% of its assets, based on market value, consist of real estate, of which at least 30% is located in the Netherlands. Additionally, the main activity of the entity must involve acquiring, selling, and/or operating real estate. This means that the legal entity's primary objective is to generate at least 70% of its activities from the acquisition, disposal, or exploitation of real estate.

Deferral of tax

In contrast to the direct sale of real estate, it is not possible to form a reinvestment reserve. It is possible to defer corporate income tax and real estate transfer tax if shares are transferred to a Dutch legal entity in exchange for shares in the acquiring entity. However, various detailed conditions apply.

Losses

If a company sell their interest in a subsidiary, the losses arising on this sale cannot be offset against profits due to the participation exemption (in Dutch: deelnemingsvrijstelling). For shareholdings below 5%, this does not apply.

Non-resident company

Corporate income tax

Foreign companies are solely taxed in the Netherlands for Dutch income (e.g. income earned by an enterprise in the Netherlands). Under certain conditions, it is possible to form a fiscal unity with a permanent establishment located in the Netherlands. However, various detailed conditions apply.