Proposed bill to abolish the RETT exemption (‘samenloopvrijstelling’) in case of an acquisition of shares in a real estate company

Back to outline Tax Plan

Part of these plans is a bill on real estate share transactions that is important for the Dutch real estate sector.

The purpose of this bill is to prevent that no VAT and RETT is due on the transfer of new immovable property via share transactions when certain conditions are met. If the bill is adopted, this will lead to an narrowing of the concurrence exemption (in Dutch: ‘samenloopvrijstelling’) in the real estate transfer tax (‘RETT’) as of January 1, 2025.

Background

Currently, the RETT concurrence exemption can be applied on the acquisition of a qualifying interest in a real estate company as far as this exemption would apply in case of a direct acquisition of the real estate owned by this company, e.g. in case of building land or newly developed property for VAT purposes.

On February 28, 2023, a draft bill on real estate share transactions was submitted to the practice for consultation. It was proposed to refuse the application of the RETT concurrence exemption for the acquisition of shares in a real estate entity.

The reason behind this is to combat a VAT advantage that arises when the real estate in question is or will be used for VAT exempt or other purposes that do not allow for a deduction of VAT (e.g. residential property). In case of a transfer of shares, neither VAT nor RETT is triggered, whereas in case of an asset deal, 21% non-recoverable VAT (and no RETT) would be due.

After an online consultation by the Ministry of Finance in which many comments were brought forward, the Dutch government has decided to amend the initial draft bill. The amendments have now been included in the new proposed bill.

Proposal bill

As it now stands the following amendments of the RETT concurrence exemption in case of a share deal are included in the proposed bill:

• The RETT concurrence exemption will no longer be applicable on the acquisition of shares in a real estate company where the underlying immovable property is used for less than 90% VAT taxable activities for at least two years after acquisition of the shares.
• The remaining acquisitions of shares in a real estate company covered by the bill will be subject to a reduced RETT rate of 4% (instead of the 10,4% general RETT rate).
• The aimed date of entry into force of the draft bill is January 1, 2025.

There will also be a transitional arrangement for projects for which:

I.       a letter of intent has been signed before the moment of submission of the bill (i.e. 19 September 2023 at 15:15);
II.       the letter of intent has been provided to the tax inspector within three months after 1 January 2024; and
III.      it can be substantiated that signing the LOI was not done merely to make use of the transitional arrangement. 

The transitional arrangement will end on 1 January 2030. In the above mentioned situations, the RETT exemption should still be applicable under the transitional law.

The legislator continues to monitor unintended behavioral effects that may arise as a result of this change in the law, but does not yet intend to introduce a cooperative group provision in transfer tax as already introduced in corporate tax. The government’s preference is to combat structuring, if necessary, through the doctrine of abuse of law.