Investigation into the pros and cons of a possible REIT-regime in the Netherlands
As from 1 January 2025, the fiscal investment institution (“FII”) regime will no longer be accessible for companies directly investing in Dutch real estate. As a result, these real estate investment companies will become subject to the regular Dutch corporate income tax regime as per 2025 instead of subject to a 0% tax rate which applies to FIIs. Since the announcement of this abolishment for real estate FIIs, a topic of debate in Dutch politics has been the introduction of an alternative Dutch real estate investment trust (“REIT”) regime as many countries (in Europe) have a REIT-type of regime. The Dutch State Secretary of Finance therefore decided to investigate the pros and cons of a new Dutch REIT-regime.
On 7 June, a letter was sent to Dutch Lower House of Parliament on the outcome of this REIT-regime investigation. In an international context it is noted that the abolishment of the real estate FIIs per 2025 puts the Netherlands at a disadvantage compared to other European countries that have a REIT-regime. The letter states that advantages of a Dutch REIT-regime are that the tax neutrality of a REIT-regime stimulates collective investment in Dutch real estate (such as residential real estate) and that the Dutch investment climate as a whole may benefit from a REIT-regime. In consideration of the tax leakages that led to the abolishment of the real estate FII-regime as per 2025, the design and implementation of a new REIT-regime requires careful consideration. In addition, the tax neutral character of a REIT-regime will lead to a budgetary loss.
The State Secretary indicates that the design and implementation of a new REIT-regime needs to be reviewed by the new government and whether it is desirable to introduce a REIT-regime. We note that the coalition parties have not expressed their opinion (yet) on whether they want to implement a new REIT-regime or not. The letter of the current State Secretary presents some options that could be considered for a new REIT-regime, for instance to tax a REIT at a rate of 15% and to provide relief of double taxation at the level of the REIT for the withholding tax charged to it and at the level of the (Dutch) participants in the REIT for the taxes charged at the level of the REIT. A rate of 15% is in line with the dividend withholding tax rate at this moment. It can also be investigated to what extent it is possible to exempt a REIT from corporate income tax and dividend withholding tax, and to levy tax on the WOZ-value of the real estate (a value assessed by the local municipality each year), whether or not in combination with a withholding tax on rent. No further details are included in the letter on these possible options for a new REIT-regime in the Netherlands.
KPMG Meijburg & Co comments
We are happy to see that the Dutch government has carried out this investigation and appears to be seriously looking into the introduction of an alternative regime for real estate investment companies in light of the real estate FII abolishment as per 2025. It remains to be seen if the new coalition is in favour of a REIT-regime. We continue to monitor these developments closely and will keep you updated.
