New Dutch transfer tax rules for real estate companies

As of January 1 2025, the acquisition of shares in Dutch real estate companies will be subject to real estate transfer tax (RETT) more often. Since RETT is non-recoverable, this directly impacts business cases.

The implementing legislation is especially relevant for newly built residential projects and any real estate leased out exempt from VAT.

The Dutch RETT levy on the acquisition of Dutch real estate applies at a general rate of 10.4%. A lowered rate of 2% applies (only) to the acquisition of a residence by its prospective resident homeowner. Furthermore, RETT legislation allows for multiple exemptions and facilities to cater for situations such as intragroup reorganisations, (de)mergers, and the acquisition of newly built real estate, all subject to conditions.

The Dutch RETT system closely interacts with Dutch VAT legislation (the latter being based on the European VAT system), whereby in most cases a transaction involving Dutch real estate is taxed with RETT or VAT – only rarely are both types of taxes due. On occasion, neither is due.

The acquisition of shares may also be subject to RETT if the entity qualifies as a real estate company. Before, the RETT exemption for newly built real estate applied (more or less) similarly to acquisitions of property in an asset deal as it did in a share deal. As of January 1 2025, this will change.

A typical situation where neither VAT nor RETT was due involves the sale and transfer of shares in a real estate company owning newly built real estate. If the real estate in question involves residential real estate (leased out long term to residents), a comparable sale and transfer of the asset would have been taxed with (non-deductible) VAT at a 21% rate. This discrepancy in the tax burden at a real estate project level was deemed unwanted and is targeted by the newly implemented legislation.

In principle, the acquisition of shares in a real estate company holding newly developed real estate will be subject to a newly introduced 4% RETT rate. This rate is said to best approximate a tax burden on the underlying real estate project as if it had been transferred in an asset deal. The RETT exemption for newly built properties will, however, continue to apply if 90% or more of the underlying real estate’s use is such that the owner is allowed to deduct VAT for at least two years. Note that this requires investors to perform extra bookkeeping for tax purposes.

A transitional law applies – subject to conditions, and only upon request – to projects that have been duly notified to the Dutch tax authorities prior to April 2 2024.

For planned share deals, it could be wise to see whether the legal transfer of the shares can be brought forward to take place this year to avoid the need for extra bookkeeping and/or additional taxation.

In situations where the parties can reach an agreement on the commercial terms but the buyer cannot get the financing in place before the end of the year, the following may be of interest. Dutch civil law provides for a legal transfer to take place in, for example, 2024, with payment of the purchase price at a later date, in 2025 (Groninger Akte). For RETT purposes, the acquisition takes place at the (earlier) time of the legal transfer (in 2024), allowing the current RETT regime to be taken advantage of, even though, financially, the deal will be finalised in 2025.