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Quick overview of Dutch Real Estate

 

Rental income and capital gains of Dutch real estate

Taxpayer

Basis of tax

Tax levied

Tax rates (2020)

Resident individual

 

 

Non-resident individual

 

 

Resident company

 

 

Non-Resident company

 

Rental income

Capital gains

 

Rental income

Capital gains

 

Rental income

Capital gains

 

Rental income

Capital gains

Personal income tax

Real estate profit tax

 

Personal income tax

Real estate profit tax

 

Corporate income tax

Corporate income tax

 

Corporate income tax

Corporate income tax

0.54 – 1.60%

Not applicable

 

0.54 – 1.60%

Not applicable

 

Up to 25%

Up to 25%

 

Up to 25%

Up to 25%

 

Rental income

Individuals
Introduction
Rental income is taxed as ordinary private or business income.

Liability to tax
Rental income received by individuals is subject to personal income tax.

Basis to tax
Income of individuals is allocated in three ‘boxes’ with different tax rates. Categories of income taxed in box 1 are income out of employment and business profit (entrepreneurial activities). If rental income qualifies as business income, it will be taxed in box 1 against a progressive tax rate to a maximum of 46.5%. The individual must deliver a certain level of labour or entrepreneurial activities. In most cases, direct investment in real estate does not qualify as income taxed in box 1 and will be taxed in box 3.

Income taxed in box 2 is income out of shareholding of at least 5%. Income such as dividends or capital gains realised on the transfer of shares will be taxed against a flat tax rate of 26.25%.

Income taxed in box 3 is income out of savings and investments whereby the actual rental income is not relevant. Fictional return (1.789% to 5.28% of the value of the net assets) will be taxed at a flat rate of 30%.

Companies

Introduction
Rental income is taxed as business income.

Liability to tax
Rental income earned by companies is subject to corporate income tax as business income.

Basis to tax
Business income up to EUR 200,000 is taxed against a tax rate of 16.5%. For profits of more than EUR 200,000 are taxed against a tax rate of 25%.

Capital gains

Individuals

Introduction
In general, capital gains realised by individuals are not directly subjected to personal income tax. Instead, a fictional return (1.789% of 5.28% of the value of the net assets) will be taxed at a flat rate of 30%.

Liability to tax
Capital gains realised by individuals may be subjected to personal income tax in box 1 under specific circumstances. In short, the individual must deliver a certain level of labour or entrepreneurial activities. The realised capital gains are subject to the personal income tax at a rate up to 49.5%.

Basis of tax
Income taxed in box 3 is income out of savings and investments whereby the actual income is not relevant. A fictional return (1.789% to 5.28% of the value of the net assets minus loans related to the real estate) will be taxed at a flat rate of 30%.

Companies

Introduction
Capital gains realised by companies are subject to corporate income tax as business income.

Liability to tax
Business income up to EUR 200,000 is taxed against a tax rate of 16.5%. For profits of more than EUR 200,000 are taxed against a tax rate of 25%.

Exemptions
Companies can defer taxation on realised capital gains by creating a reinvestment reserve. The capital gains are not taxed at the moment of selling but a reinvestment reserve will be formed for the amount of the capital gains. The company must make a reinvestment three years after the year in which the sale took place. If another building is bought, the value of the reinvestment reserve can be deducted from the purchase price of the new property. As a result of this, the future depreciation costs are lower resulting in higher taxable income.

Dutch VAT & transfer taxes

Taxpayer

Basis of tax

Tax levied

Tax rates (2020)

Resident individual

 

 

 

Non-resident individual

 

 

 

Resident company

 

 

 

Non-Resident company

 

Rental income

Transfer of real estate transactions

 

Rental income

Transfer of real estate transactions

 

Rental income

Transfer of real estate transactions

 

Rental income

Transfer of real estate transactions

 

Value Added Tax

Transfer Taxes

 

 

Value Added Tax

Transfer Taxes

 

 

Value Added Tax

Transfer Taxes

 

 

Value Added Tax

Transfer Taxes

 

21%

2 / 6%*

 

 

21%

2 / 6%

 

 

21%

2 / 6%

 

 

21%

2 / 6%

 

* 2% tariff applies on the transfer of dwellings. By dwellings we mean immovable property that is intended for residential purposes.

Value-Added Tax

Individuals

Introduction
Value-added tax is a tax based on the increase in value of a product or service at each stage of the supply the chain.

Liability to tax
If a company performs commercial or professional activities in the Netherlands, it will be in principle subject to the VAT.

Basis of tax
As a general rule, the supply and lease of immovable property are exempt from VAT. However, VAT is charged if a newly created building is sold within two years after its first occupation. Thereby, the supplier and the recipient can opt for a VAT-able supply or lease of the property. The applicable VAT rate is 21%.

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

Companies

The same rules as for individuals apply.

Transfer Taxes

Individuals

Introduction
Transfer tax is a tax on the passing of real estate from one person or company to another. This also applies to limited rights to which real estate is subject such as leasehold or a right of superficies.

Liability to tax
Transfer taxes applies by the acquisition of the legal or economic ownership of Dutch real estate and is payable by the purchaser. Transfer tax is also due upon the acquisition of a qualifying interest in a so-called real estate entity.

Basis of tax
The due transfer tax is calculated on the market value. This market value shall be at least equal to the purchase price. The application tax rate is 2% on the transfer of dwellings and 6% on other real estate.  

Exemptions

There are various exemptions available. For example, an exemption from transfer tax applies to the acquisition of newly constructed real estate or a building site, in respect to which VAT (21%) is due. Furthermore, there are several exemptions related to (de)mergers and/or internal reorganisations. However, various detailed conditions apply.

Reductions

There are various reductions of the taxable basis available. In case the real estate is transferred a second time within six months, the taxable basis of the first transaction can be deducted from the taxable basis of the second transaction.

Companies

The same rules as for individuals apply.

Dutch Local taxes

Taxpayer

Basis of tax

Tax levied

Tax rates

Resident individual

 

Non-resident individual

 

Resident company

 

Non-Resident company

 

Market value *

 

Market value

 

Market value

 

Market value

 

Municipal Tax

 

Municipal Tax

 

Municipal Tax

 

Municipal Tax

 

Depend on the municipality

Depend on the municipality

Depend on the municipality

Depend on the municipality

* There are certain rules to determine the market value for local taxes. Every municipality determines this market value which is open for appeal.

Introduction
Every municipality levies an annual municipal tax on Dutch real estate.

Liability to tax
Every owner or user of residential or commercial buildings in the Netherlands is liable to local municipal tax.

Basis of tax
The local tax is based on the so-called ‘WOZ-value’. For commercial real estate it is the market value, given certain legally prescribed assumption. Local authorities determine the WOZ-value (in Dutch: WOZ-waarde) and each municipality has its local tariff.

Dutch Net Wealth/worth taxes

Taxpayer

Basis of tax

Tax levied

Tax rates (2020)

Resident individual

 

Non-resident individual

 

Resident company

 

Non-Resident company

 

Net value of real estate

 

Net value of real estate

 

Not applicable

 

Not applicable

 

Personal income tax

 

Personal income tax

 

Not applicable

 

Not applicable

 

30%

 

30%

 

Not applicable

 

Not applicable

 

 

Individuals

Introduction
The Netherlands do not levy a separate wealth or worth tax. Instead, personal income tax is levied on the total value of assets, including real estate. Loans on real estate are deductible from the taxable basis.

Liability to tax
Personal income tax (box 3) is due to the net wealth of individuals. Net wealth includes the value of real estate less the liabilities related to the real estate.

Basis of tax
Income taxed in box 3 is income out of savings and investments whereby the actual income is not relevant. A fictional return (1.789% to 5.28% of the value of the net assets minus loans related to the real estate) will be taxed at a flat rate of 30%.

Vehicles for Dutch real estate

Commonly used vehicles for Dutch real estate

Corporate entities

The so-called ‘BV’, the Dutch limited liability company, is the most frequently used vehicle for the ownership of Dutch real estate. The equity is divided into shares and the shareholders of the BV are not personally liable for the business debt.

Individuals who hold 5% or more of the shares in a Dutch company are holders of the so-called substantial interest (in Dutch: aanmerkelijk belang). Income derived from the substantial interest are subjected to a 26.25% personal income tax rate (box 2). Profits made by the BV are subject to the corporate income tax at a tax rate up to 25%.

Transparent vehicles

Investments in real estate are often done on a collective basis by some of the entities and/or individuals. For Dutch tax purposes, there is no distinction between taxation of partnerships and joint ventures. In some cases, a partnership of mutual fund can be structured as tax transparent entity. The profits and losses of the entity will hereby be allocated directly to the partners. Furthermore, partners of a transparent entity are not subjected to Dutch dividend withholding tax upon distribution of profits. This structure thus avoids multiple level taxation. Examples of transparent vehicles are the closed CV and the closed FGR (fonds voor gemene rekening, or mutual fund).

The CV has at least one managing partner and one limited partner. In case a partner leaves the CV, the entity ceases to exist. The CV is treated as transparent for tax purposes (closed-CV) unless the CV doesn´t have stringent restriction regarding the admittance of new members or transferring shares (open-CV). Similar rules apply to the FGR.

The open-CV or open-FGR is treaded as a company for Dutch tax purposes. Profits made by the open CV are subject to the corporate income tax at a tax rate up to 26,25%. Partners of a so-called ‘open-CV’ or ‘open-FGR’ are subjected to taxation (personal income tax or corporate income tax). Individuals who hold 5% or more interest in the open-CV or open-FGR are holders of a substantial interest and income such as dividends paid from the open-CV or open-FGR is taxed in box 2 against a flat tax rate of 26.25

Trusts

The concept of the trust is not known under Dutch law. For tax purposes, the assets and liabilities of a trust are allocated to the trustor as personal income. Profits realised by the trusts will be taxed by the trustor as personal income tax.

Foreign partnership

The residence of a partnership is determined by the place where the crucial decisions are made. Usually, the residence is the place where all partners meet.

In case a foreign partnership carries an enterprise in the Netherlands, the partnership is subject to Dutch corporate income tax or the partners are subject to Dutch personal income tax. The foreign partnership qualifies as a permanent establishment in the Netherlands by owning Dutch real estate. The partners are subjected to Dutch personal income tax.

Specific real estate vehicles for Dutch real estate

Real estate investment trusts

Under Dutch law, there are no specific real estate vehicles.

In some circumstances it’s possible to form an exempt investment vehicle (in Dutch: fiscale beleggingsinstelling or FBI). The FBI can be considered a REIT lookalike. It is a special form of a fund which can be used for portfolio investments. However, several detailed conditions apply when establishing an FBI. Among other things, an FBI is required to distribute its profits no later than eight months after the end of the financial year. In addition, the shareholder cannot hold the shares as a so-called substantial interest. The shares of individuals who hold 5% or more of the shares cannot qualify as the shares of an FBI-fund. The applicable corporate income tax on FBI-funds is 0%. In case the FBI pays out profits, dividend withholding tax will be due.

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Can we help you?

Please contact Onno Adriaansens for more information:

   
Onno Adriaansens    
Head of Real Estate and Co-chair European Real Estate Sector Team    
+31(0)6 515 406 67    
[email protected]