NL Tax Alert: Budget Day proposals relating to real estate
Yesterday was Budget Day in NL with several tax proposals published. The legislative proposals first need to be approved by both chambers of the Dutch Parliament. Some highlights relating to real estate:
Measures relevant for real estate industry:
- From January 1st, 2025 the real estate transfer tax concurrence exemption shall no longer be applicable for the acquisition of shares in a qualifying real estate company, unless at least 90% of the real estate is used for activities subject to VAT at acquisition of the shares and the real estate is being used for at least 90% subject to VAT for a continuous period of at least two years following the share acquisition. If the real estate is being used less than 90% subject to VAT in the aforementioned situation, real estate transfer tax shall be due at a tax rate of 4%.
- From January 1st, 2025 the Dutch fiscal investment institution regime (FBI) and 0% corporate income tax rate is no longer applicable for entities holding real estate directly. Such entities shall be taxed at regular corporate income tax rates. Fiscal investment institutions forced to restructure due to the governmental measures are facilitated with transitional rules for real estate transfer tax from January 1st, 2024 to 31 December 31, 2024. Entities with indirect investments in Dutch real estate and direct investments in foreign real estate can still apply the Dutch fiscal investment institution regime.
- Application of the reinvestment reserve shall also be allowed when a business is partially wounded up due to government intervention. Reinvestment (and thus deferral of the tax claim) can be made into either a new business or an existing business owned by the taxpayer in question.
- Third-party leased real estate is automatically categorized as investment assets in the business succession scheme (BOR) in gift and inheritance tax and the rollover relief scheme in income tax for substantial interest as per January 1st, 2024.
Measures for the environment and energy transition:
- The regimes of the energy investment deduction (EIA), environmental investment deduction (MIA) and accelerated depreciation for environmental investments (VAMIL) are extended by the government up to December 31st, 2028.
- The deduction rate for the energy investment deduction (EIA) shall be permanently reduced from 45.5% to 40% as per January 1st, 2024. However, the budget of the EIA shall be increased from 2025 onwards.