Netherlands: New framework for determining characterization for tax purposes of foreign legal forms
New framework will become effective January 1, 2025
The final decree establishing the new framework for assessing whether foreign legal forms qualify as transparent or non‑transparent for tax purposes, as well as several policy statements regarding transitional rules, were published.
The new framework will become effective January 1, 2025.
Rules under new framework
The new framework essentially consists of the following five components:
- Discontinuation of the open limited partnership (open commanditaire vennootschap (open CV))
- Changes to the definition of mutual fund (fonds voor gemene rekening (FGR))
- Adoption of legal form comparison method
- New decree on the comparison of foreign legal forms
- Introduction of fixed and symmetrical qualification method for non-comparable legal forms
Transitional rules
The discontinuation of the independently taxable status of the open CV, and in some cases of a fund (because it no longer qualifies as an FGR), may lead to the levying of corporate income tax at the level of the open CV or the FGR, and to the levying of individual (personal) income tax or corporate income tax at the level of the participants in that open CV or FGR. In order to avoid immediate taxation as much as possible, transitional rules have been provided for the year 2024. The transitional rules essentially contain three elements:
- Transfer facility for the tax claim on the untaxed gains and reserves, the tax reserves, and the goodwill present in the open CV or the FGR
- Share merger for certain participants and unitholders
- Payment in installments over no more than ten years
Read a November 2024 report prepared by the KPMG member firm in the Netherlands