How can we assist you?

    News

    Dutch coalition agreement: significant tax measures for real estate investors

  • NL EN
  • On October 10, 2017, the Dutch coalition agreement was published. This coalition agreement proposes significant tax measures for real estate investors. Van Doorne provides an overview of the significant tax measures proposed for individuals below.

    FISCAL INVESTMENT INSTITUTIONS MAY NO LONGER DIRECTLY INVEST IN REAL ESTATE

    • Fiscal investment institutions (fiscale beleggingsinstellingen; Fbi's) will no longer be allowed to directly invest in real estate. Fbi's may currently directly own real estate for investment purposes, as result of which the operation of this real estate can take place at a 0% corporate income tax rate. As a consequence of the announced measure, Fbi's can no longer invest in real estate at this preferential 0% rate. This measure is announced in connection with the abolition of the Dutch dividend withholding tax.
    • It is envisaged that this measure will enter info force on 1 January 2020. It is thus expected that real estate Fbi's will need to restructure their assets.      

    LIMITATION OF DEPRECIATION ON REAL ESTATE

    • Depreciation of real estate that is being used within the company's enterprise will be restricted to the extent the tax book value exceeds the WOZ value. Currently, depreciation is allowed up to 50% of the WOZ value. With this proposed measure, the depreciation system for real estate used within the company's enterprise and real estate leased to third parties will be equal. 
    • The expected date of implementation is 1 January 2019.

    DUTCH CORPORATE INCOME TAX RATES IN STEPS DOWN TO 16% AND 21%

    • The Dutch corporate income  tax ("CIT") rate will per 2019 be lowered in three steps to 16% for taxable profits up to € 200,000 and 21% for any excess: 
      - 2019: 19% for taxable profits up to € 200,000; 24% for the excess. 
      - 2020: 17.5% for taxable profits up to € 200,000; 22.5% for the excess. 
      - 2021: 16% for taxable profits up to € 200,000; 21% for the excess.
    • The earlier announced expansion of the first CIT bracket - from € 200,000 to € 350,000 - will not be implemented. This means that also in 2018 the first CIT bracket will end  at € 200,000 with an applicable CIT rate of 20%.

    USE OF CIT CARRY FORWARD LOSSES LIMITED TO SIX YEARS

    • The current regime in the Dutch CITA, that facilitates that CIT losses may be offset with taxable profits of the following nine years, will be tightened. Carry forward of CIT losses will be limited to six years.
    • The expected date of implementation is 1 January 2019.

    MORE CLARITY ABOUT INTRODUCING EU EARNINGS STRIPPING RULE

    • As a consequence of the earnings stripping rule that is included in the EU's Anti Tax Avoidance Directive ("ATAD"), interest payments will not be deductible if the balance of payable and received (both group and third party) interest is higher than 30% of the taxpayer's EBITDA.
    • The earnings stripping rule will only apply insofar interest costs exceed € 1 million.
    • In conjunction with the introduction of the earnings stripping rule, some (still undefined) interest deductibility limitations will be abolished. Article 10a CITA will be maintained.
    • The expected date of implementation is 1 January 2019.

    DUTCH DIVIDEND WITHHOLDING TAX IS LARGELY ABOLISHED

    • The dividend withholding tax will be largely abolished
    • Exceptions are made for dividend payments in "abusive" situations and when dividends are paid to so-called  "low tax jurisdictions".
    • The coalition agreement does not elaborate on which situations will be considered  "abusive", but it is likely that the recently introduced Principal Purpose Test for Dutch BVs, NVs and holding cooperatives will used to flag abusive situations. This means that a situation is deemed "abusive" if: 
      - The shares / membership rights of companies or holding cooperatives established in the Netherlands are held with the main purpose, or one of the main purposes, to avoid dividend withholding tax in another jurisdiction (subjective test) to be avoided; and 
      - An artificial structure or transaction is used or executed (objective test).
    • "Low tax jurisdictions" are expected to be defined as jurisdictions that have an effective profit tax rate of less than 10%.
    • The expected date of implementation is 1 January 2019.

    INTRODUCTION OF A WITHHOLDING TAX ON INTEREST AND ROYALTY PAYMENTS TO 'LOW TAX JURISDICTIONS'

    • A withholding tax on interest and royalty payments to 'low tax jurisdictions' will be introduced.
    • The expected date of implementation is 1 January 2023.

    More about