ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN THE NETHERLANDS]

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Foreign investors in Dutch real estate are strongly recommended to acquire further tax advice. Capital gains on real estate or shares in a Dutch corporate entity holding real estate Capital gains made by a Dutch corporate entity and a foreign corporate entity (also by means of a partnership) is subject to Dutch Corporate income tax. Capital gains made by individuals under the regime of Box 1 of Income tax are progressively taxed. In case there is an intention to reinvest a capital gain, profit from selling real estate can be reserved in a fiscal reserve up until three years after selling. Within these three years reinvestment has to take place. If not, the capital gain is taxed in the third year after selling at the latest. Capital gains on the sale of shares in a corporate entity by a Dutch corporate entity is in general exempt from corporate income tax. The Corporate income tax act provides for a participation exemption on dividends and capital gains for Dutch and foreign held shares by Dutch corporate entities under the following conditions: - at least 5% of the shares is held by the Dutch corporate entity; - the shares are not held as an investment; - the participation is subject to a corporate tax with a realistic tax rate compared to Dutch tax rates, or less than 50% of the assets of the participation consists of low tax rated investments (surplus liquidities, assets related to passive financing of group companies, or assets that are placed at the disposal of group companies).

Dividend withholding tax Dividends are subject to Dividend withholding tax. Below the current Dividend withholding tax rules for the following categories: - dividends paid to shareholders natural persons with a substantial interest; - dividends paid to shareholders natural persons without substantial interest; - dividends paid to a resident corporate entity; - dividends paid to a non-resident corporate entity. Dividends paid to shareholders (natural persons) with a substantial interest (5% or more of the shares) are subject to 15% Dividend withholding tax. Dividend withholding tax is an advance levy before Box 2 flat rate of 26,90% (2021) in Income tax. In case the shareholder with a substantial interest is a non- resident the same rules in principle apply. The non-residential shareholder is considered as a non-resident taxpayer for Dutch income tax purposes. Dutch tax regulations and tax rates may be overruled and/or adjusted in case a tax treaty is applicable with the country of residence of the non-resident shareholder. Dividends paid to resident shareholders without substantial interest are subject to 15% Dividend tax. Dividend withheld tax is refundable and/or can be settled with due Income tax. Non-resident shareholders without substantial interest are also subject to 15% Dutch withholding Dividend tax. Dutch tax rates may be overruled and/or adjusted in case a tax treaty is applicable with the country of residence of the non-resident shareholder. On request the Dutch tax authorities will refund Dividend tax entirely or partly, depending on the applicable treaty.

ILN Real Estate Group – Buying and Selling Real Estate Series

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