Dutch Tax Memorandum – Dutch FBI-status and German Sondervermögen

Last Friday (3 September 2021), the Dutch Court of Appeals (“CoA”) issued an important decision(1) regarding the eligibility of German Sondervermögen to apply the Dutch fiscal investment institution (“FBI”) regime.

1. Essence

In its decision, the Dutch CoA rules that German Sondervermögen holding Dutch real estate assets are eligible for the application of the Dutch FBI status (and thus the 0% Dutch CIT rate), in case the relevant FBI requirements are fulfilled. The decision of the Dutch CoA is discussed, hereafter.

2. Facts / circumstances

The relevant taxpayer is a German Immobilien-Sondervermögen that (among others) holds
(direct) Dutch real estate assets. It is in dispute whether the German Sondervermögen is liable to corporate income tax in the Netherlands based on its legal form and (if so) whether the Sondervermögen is eligible to apply the Dutch FBI regime.

3. Summary of main decisions

The decision of the CoA can be subdivided into general decisions as to how the Dutch FBI regime should be applied to German Sondervermögen, as well as specific decisions as to how the “old FBI regime” (until 1 August 2007) and the “new FBI regime” should be applied to German Sondervermögen that hold Dutch real estate assets.


The CoA rules that German Sondervermögen can – as a general rule – be regarded as so-called “purpose vehicles” (doelvermogens) and are therefore subject to Dutch corporate income tax as non-resident taxpayers if such German Sondervermögen hold Dutch real estate assets.

The CoA further rules that for the question whether the Sondervermögen can fulfill the activities (i.e. investments) test of the Dutch FBI status, its worldwide (and not only its Dutch) activities must be considered. However, as the Dutch tax authorities do in practice not actually review whether Dutch resident FBIs fulfill the activities test for their foreign real estate activities, the CoA decides to also not actually investigate the non-Dutch activities of the German Sondervermögen in question and assumes that the Sondervermögen in question meets the activities requirements based on its Dutch activities only.
For the assessment of the other FBI requirements, the CoA makes a distinction between the Old FBI regime (till August 2007) and the New FBI regime (thereafter).

Old FBI regime

Under the old FBI regime, foreign entities were excluded from applying the Dutch FBI status, by law. The CoA rules that this is a violation of the freedom of movement of capital and subsequently refers to the Supreme Court decision Köln Aktionfonds2 (in which it was decided that Sondervermögen may be entitled to refund of Dutch dividend withholding tax in case the Sondervermögen in question would take into account a “replacement payment”). This replacement payment must be equal to the Dutch dividend tax due, in case the fund and its investors would be resident in the Netherlands.

The CoA applies the requirement of the replacement payment for the refund of Dutch dividend withholding tax also as a requirement for the Sondervermögen to apply the FBI regime for corporate income tax purposes. As the Sondervermögen in question did not agree to calculate or take into account the replacement payment, the CoA denied application of the FBI regime with for the fiscal years until 2007.

New FBI regime

Under the new FBI regime, certain foreign entities among which Sondervermögen that fulfill the FBI requirements can apply the Dutch FBI status. The CoA re-confirms this.

The CoA concludes that the Sondervermögen in question meets the requirements for the FBI regime, with the exception for the requirement that upon transition from the regular corporate income tax regime to the 0% FBI regime (in 2007), the hidden reserves of the Sondervermögen must be taken into account (final tax settlement).

The Sondervermögen in question takes the view that the final tax settlement is not a requirement to enter the FBI regime, but merely a consequence of entering into the FBI regime. As the statute of limitations for imposing a tax assessment for the final tax settlement did elapse, this Sondervermögen took the position that the final tax settlement could no longer be applied.

The CoA does not agree to this position and rules that the final tax settlement is not merely a consequence but indeed a constitutive requirement to enter the FBI-regime. As the Sondervermögen in question, does not fulfill this requirement and does not have the intention to agree to settle the final tax settlement in the fiscal year before entering the 0% regime, the CoA also denies application of the FBI-regime for the years after 2007.

4. Going forward

Subject to a decision of the Dutch Supreme Court in a possible appeal, all pending objections based on the argument that German Sondervermögen do not qualify as “purpose vehicles”
(doelvermogens) and therefore are not subject to Dutch corporate income tax seem to have very little chances for success.

Insofar as German Sondervermögen hold Dutch real estate assets, however it is confirmed that the FBI status can be applied, assuming that the FBI requirements are fulfilled.

On behalf of the German Sondervermögen managed by you that hold Dutch real estate assets, we recommend to review whether the FBI requirements are fulfilled for the open fiscal years (if this has not already been done).
In case the FBI requirements are fulfilled for one or more fiscal years, a calculation should be prepared regarding the amount of the replacement payment to be taken into account (for fiscal years under the old FBI regime) and regarding the amount of taxation over the hidden reserves upon entering the 0% regime (for fiscal years under the new FBI regime).

We would be happy to help you with these assessments and calculations and advice you on the further steps which in most cases would involve a (constructive) discussion with the Dutch tax authorities.

In case you have any comments or questions regarding the above, please do not hesitate contacting us.

vanOlde B.V.

(1) Gerechtshof ‘s-Hertogenbosch, 18/00721 till 18/00732 and 18/00746, 3 September 2021.
(2) Hoge Raad, 16/03954, 17/02428, 19/01141, 23 October 2020.

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