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The Dutch Ministry of Finance has published a legislative proposal for consultation regarding real estate transfer tax (RETT). Its goal is to abolish the concurrence exemption when acquiring shares in a real estate entity.

If a seller sells newly developed real estate, VAT (21%) is due on the purchase price. The purchaser can simultaneously claim the concurrence exemption for RETT. However, if the same newly developed real estate is transferred via a share deal, this transfer is exempt from VAT. In 2011, the Dutch Supreme Court ruled that on the basis of the aforementioned concurrence exemption, no RETT (10.4%) is due in such a case either. This effectively results in a VAT benefit.

Potential implications 
Based on the legislative proposal, the VAT benefit that can be realized in specific situations is corrected with a RETT levy. This means that the sale of newly developed real estate directly and via a share deal are still not treated equally. Nevertheless, according to the Ministry, this is the most efficient and effective measure to address the unequal tax burden. The Ministry has rejected other VAT-based solutions, such as reintroducing the VAT integration tax or making a share transaction subject to VAT.

Consequently, the costs of investing in newly developed real estate via a share deal will increase, making this route of investing less attractive. The Dutch market benefits from a healthy package of legislation on residential and other construction. If this legislative proposal is viewed in a broader context, we believe it will contribute to an increasingly less attractive and difficult package of construction legislation. There is a huge need for residential and healthcare real estate construction in the Netherlands. This legislative proposal is one of many developments in recent years that complicate and delay construction projects.

The building sector in the Netherlands is not receiving the boost it needs due to inconsistent regulation, politics and developments in jurisprudence. The legislative proposal is an extra burden and will once again make construction less attractive. NautaDutilh has submitted a response via the online consultation to address this matter.

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