Netherlands: Amendments to draft bill to abolish property transfer tax concurrence exemption for share transactions
Proposed amendments to a draft bill
Proposed amendments to a draft bill
The Minister of Finance on 23 June 2023 announced in a letter to the Lower House of Parliament amendments to the draft bill to abolish the property transfer tax concurrence exemption for share transactions.
Value added tax (VAT) is, in principle, automatically payable on direct supplies of new immovable property and/or building land for VAT purposes (the current VAT rate is 21%). For property transfer tax purposes, an exemption in principle applies for the acquisition of this immovable property: the concurrence exemption.
Under current legislation and case law, it is possible to use a share transaction to indirectly transfer new immovable property and/or building land (for VAT purposes) without incurring VAT or property transfer tax. The government regards this situation as an undesirable and “unintended tax savings structure.”
The draft bill would address this undesirable situation by making the acquisition of a qualifying shareholding (>1/3) in a real estate entity with new immovable property and/or building land for VAT purposes subject to property transfer tax as of 1 January 2024 (the current property transfer tax rate is 10.4%).
The government on 27 February 2023 launched an internet consultation on the draft bill. Read TaxNewsFlash
Proposed amendments to draft bill
After consideration of the comments received, the government proposes to amend the draft bill as follows:
- The proposed effective date would be postponed until 1 January 2025.
- The scope of the proposal would be limited to new immovable property and/or building land that is not used for more than 90% for VAT-taxed purposes for two years after the acquisition of (> 1/3 of) the shares of the real estate entity.
- If the acquisition of the shares in the real estate entity is nevertheless taxed, the real estate transfer tax payable would be a maximum of 4% instead of 10.4%.
- Transitional rules would be provided for projects that are already underway at the time the bill is introduced. The new legislation would not apply to projects in which a letter of intent is signed before the presentation of the bill and the acquisition of the shares takes place before 1 January 2030.
The final bill will be announced as part of the 2024 Tax Plan package on Budget Day later this year.
It is unclear how the real estate transfer tax will be levied if, during the first two years after acquisition of (> 1/3) interest in a real estate entity, the use of the property changes, resulting in the condition of (> 90%) use for VAT-taxed purposes no longer being met.
Read a June 2023 report prepared by the KPMG member firm in the Netherlands
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.