DIRECT PURCHASE OF REAL ESTATE

This section discusses the most important tax implications of the direct purchase of real estate. First, the impact on resident individuals and non-resident individuals is discussed. Thereafter is discussed the impact for resident companies and non-resident companies.

Resident Individuals

Transfer Taxes
Individuals who acquire Dutch real estate are subject to real estate transfer tax. The 10.4% transfer tax is payable by the buyer. This tax is levied on the market value, with the purchase price serving as the minimum taxable value. The acquisition of a residential property by an individual who intends to use it as their primary residence is subject to a reduced transfer tax rate of 2%. Various exemptions apply to transfer tax, including the first-time buyer exemption. The first-time buyer exemption allows individuals aged between 18 and 35 years who purchase a home with a maximum value of €525,000 to claim a one-time exemption, provided that the property will be used as their primary residence.

If real estate is transferred twice within six months, the tax base of the second transaction is reduced by the tax base of the first transaction, providing a tax benefit for the subsequent buyer.

Value-added tax 
As a general rule, the acquisition of immovable property is exempt from VAT. However, VAT is charged if a building site or a newly created building is sold before or within two years after its first occupation. In case of the supply of immovable property after this two-year period, under specific conditions, the supplier and the recipient can opt for a VAT-able supply of the property. The applicable VAT rate is 21%.

In case VAT is charged because a building site or a newly created building is sold, the transfer of real estate is exempt from transfer tax. In case VAT is charged because a newly created building is sold within two years after its first occupation, under circumstances the transfer of real estate can also be exempt from transfer tax.

Non-resident individuals
Non-resident individuals are treated in the same manner as resident individuals.

Resident companies

Transfer Taxes
The acquisition of real estate and rights associated with it by legal entities is subject to real estate transfer tax.

The market value of the real estate is taxed at a rate of 10.4%. The transfer tax is levied on the fair market value, with the purchase price serving as the minimum taxable value. The paid transfer tax is included in the book value of the real estate. The book value determines the depreciation level. As a result, transfer tax is not immediately deductible as an expense but is instead spread over the depreciation period.

If real estate is transferred twice within six months, the tax base of the second transaction is reduced by the tax base of the first transaction, providing a tax advantage for the subsequent buyer.

Value-added tax 
The supply of real estate is exempt from VAT, unless a new building is transferred within two years of its first use or if a building plot is supplied. In such cases, 21% VAT is due on the purchase price. If the supply of real estate is subject to VAT, the acquisition is exempt from real estate transfer tax.

Non-resident companies

Non-resident companies owning Dutch Real Estate are treated in the same manner as resident companies, since Dutch real estate is considered to be an enterprise of the non-resident company.

INDIRECT PURCHASE OF REAL ESTATE 

This section discusses the most important tax implications of the indirect purchase of real estate (share deal). First of all is discussed the impact on resident individuals and non-resident individuals. Thereafter is discussed the impact for resident companies and non-resident companies.

Resident individuals

Transfer taxes
If an individual acquires at least a one-third interest in a so-called real estate legal entity (OZR), the acquisition of shares is subject to real estate transfer tax. Specific rules may apply to acquisitions involving related parties and subsequent acquisitions.

An entity qualifies as an OZR if at least 50% of its assets, based on market value, consist of real estate, of which at least 30% is located in the Netherlands. Additionally, the main activity of the entity must involve acquiring, selling, and/or operating real estate. This means that the legal entity aims to generate at least 70% of its activities from the acquisition, disposal, or exploitation of real estate.

For the transfer of real estate shares, a transfer tax rate of 4% or 10.4% may apply.

Non-resident individuals
Non-resident individuals are treated in the same manner as resident individuals. 

Resident companies

Transfer taxes
If a legal entity acquires at least a one-third interest in a so-called real estate legal entity (OZR), the acquisition of shares is subject to real estate transfer tax.

An entity qualifies as an OZR if at least 50% of its assets, based on market value, consist of real estate, of which at least 30% is located in the Netherlands. Additionally, the main activity of the entity must involve acquiring, selling, and/or operating real estate. This means that the legal entity aims to generate at least 70% of its activities from the acquisition, disposal, or exploitation of real estate.

For the transfer of real estate shares, a transfer tax rate of 4% or 10.4% may apply.

Non-resident companies
Non-resident companies are treated in the same manner as resident companies.

More information?

For more detailed information and questions please contact your trusted RSM advisor.