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Changes in Dutch Real Estate Transfer Tax
As part of the 2011 Dutch Tax Package significant changes to the Dutch real estate transfer tax have been announced. These changes will, as of January 2011, impact taxation of transfers of shares in companies that (directly and in certain cases indirectly) own Dutch real estate assets. Due to these changes, the number of situations in which share transactions in an international real estate investment structure are subject to Dutch real estate transfer tax, will increase. Taxand Netherlands addresses the proposed changes and impact on real estate players operating internationally.
Transfers of shares in 'real estate companies' are, in principle, subject to Dutch real estate transfer tax (RETT). Following the 2011 tax package companies will more easily qualify as a real estate company and therefore share transactions are more likely to be within the scope of Dutch RETT. These changes are aimed at taxing situations in which levy of RETT currently may be avoided through the transfer of shares in companies instead of transfer of the underlying real estate assets directly.
Under the current legislation only companies of which the assets consist of 70% or more of Dutch real estate assets can qualify as real estate companies. The new legislation stipulates that companies whose assets consist of 50% or more of real estate (and whose assets consist of at least 30% Dutch real estate assets) can already qualify as 'real estate companies'.
Furthermore the legislation contains rules for excluding certain non-real estate assets for purposes of the 50% / 30% test mentioned above.
Finally the rules for determining whether (a set of) transactions result in a qualifying transfer that is subject to RETT are broadened. In this respect an important change is that in specific situations RETT may now also be due without a 'legal' acquisition of shares (i.e. changes in the rights relating to existing shares). All these changes significantly broaden the scope for levy of RETT upon transactions involving shares in entities (also) holding Dutch real estate assets.
The proposed changes will become effective on 1 January 2011. These changes will also significantly impact internationally operating real estate players. In practice we often see international structures that hold a mix of Dutch and non-Dutch assets through a variety of investment structures. Transfers in such structures are under the new rules more easily at risk of being hit with Dutch real estate transfer tax. We recommend clients that (indirectly) hold Dutch real estate to review their structure in light of the above changes to determine whether any potential future transaction will fall within the scope of Dutch real estate transfer tax as from 2011.
Your Taxand contact for further queries is:
Henk de Graaf
T. +31 20 301 66 33
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