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Dutch Real Estate Market Receives Boost From New Transfer Tax
On 31 August 2012, the Dutch Ministry of Finance announced a measure to support the Dutch real estate market by changing the real estate transfer tax (RETT) act. Taxand Netherlands explores the impact that RETT could have on professional real estate companies and private individuals.
The rule that has now been amended formerly provided for a reduced taxable base in case of purchases and sales of the same Dutch property within a 6 month period. Therefore, for transfers of the same property within a 6 month period, RETT was only due over any increase in value of the property. Due to the economic downturn, the term of 6 months is now considered too restrictive. To support the real estate market, the Dutch Ministry of Finance has announced a measure to extend the period from 6 months to 3 years.
The new RETT rule entered into force as of 1 September 2012 and will be a part of the Tax Plan 2013. The current regulation may, therefore, be substituted by a legislation as of 1 January 2013. As a result, the announced measure may become a permanent rule.
Professional real estate companies, such as real estate developers, will benefit from the new rule. They will have more time for renovation and re-development of real estate properties, while maintaining a reduced RETT basis upon (re)sale of property. They are no longer tied by the short period of 6 months.
For private individuals, the announced measure will only be favourable in specific cases, eg a divorce which results in a forced sale of a home. It is worth mentioning in this context that the renovation should, in principle, not result in a 'new' real estate property, otherwise the re-sale may become subject to Dutch VAT.
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