On 23 June 2023, the Dutch Ministry of Finance announced several adjustments to the draft legislative proposal regarding real estate transfer tax (RETT) on share deals. The objective of the proposal is to level the playing field between parties transferring newly developed real estate through an asset deal and parties acquiring newly developed real estate through a share deal. The adjustments were made in response to an internet consultation in which NautaDutilh participated.
The consultation revealed that the initial draft proposal could lead to excessive taxation and lacked transitional law. Consequently, the proposal could potentially have a negative impact on construction projects, while there is a considerable demand for residential and healthcare real estate development. As a result of industry input, several adjustments have been announced, including substantive amendments to the proposal, a delayed implementation and the introduction of transitional provisions.
Amendments to legislative proposal
Based on the amendments, an acquisition of shares in entities owning real estate or rights in real estate management (rem) that are used for at least 90% for VAT-taxed activities during two years after acquisition will remain able to benefit from the concurrence exemption for RETT. The proposal will solely be aimed at real estate or rights in rem that are used for 10% or more for VAT-exempt activities.
To prevent excessive taxation, a new and reduced maximum RETT rate of 4% will be introduced for acquisition of shares of entities owning newly developed real estate intended for VAT-exempt use acquired through a share deal. Consequently, the total tax burden is assumed to be around 21%, which is equal to the 21% VAT rate levied on sold real estate through an asset deal.
Postponed entry into force
The initial date for the entry into force of the legislative proposal was 1 January 2024. The legislative proposal is expected to be filed on Tuesday 19 September 2023 (Dutch Budget Day). The entry into force of the legislative proposal will be moved forward to 1 January 2025.
Transitional law is introduced for ongoing projects, in which a letter of intent was or will be signed before the filing date of the legislative proposal (i.e. 19 September 2023). Please note that under the transitional law the transfer of shares should have occurred no later than on 1 January 2030. For these projects, current legislation will continue to apply. This effectively means that they remain able to qualify for the concurrence exemption for RETT.
Do you have any question on this topic? Or you would like to discuss the implications of the draft proposal for a specific situation? Our Real Estate and Tax teams are happy to help you.