2025 Dutch Tax Plan: proposed measure for real estate

Tax rates

In wage and income tax (box 1), the joint basic rate will be split into two rates: the rate in the first bracket will be 35.82% (including social security contributions) and the rate in the second bracket will be 37.48%. The top rate will remain at 49.5%. It is proposed to reduce the rate in the second bracket of box 2 from 33% to 31%; the step-up rate of 24.5% is maintained. The box 3 rate will remain at 36%.

The corporate income tax rates will not be adjusted. The general rate remains 25.8%, while a step-up rate of 19% applies to the first EUR 200,000 of the taxable amount.

Interest deduction limitation

The 2025 Tax Plan proposes a measure to prevent real estate companies from splitting up to take full advantage of the interest deduction threshold under the generic interest deduction limitation (earnings stripping measure). The proposed anti-fragmentation measure means that for real estate entities with leased properties, the EUR 1 million threshold for deductible interest expenses will not apply.

A property test is used to determine whether there is a real estate entity. For this test, it is assessed whether for at least half of the year, 70% or more of the taxpayer's adjusted assets consist of real estate made available to third parties. Immovable property in this context also includes apartment rights, superficies, ground lease or easement on immovable property, and the beneficial ownership of such property or rights. The concept of beneficial ownership will be aligned with the similar concept as applied to RETT. If the taxpayer is part of a fiscal unity, the assets test will be applied at the level of that fiscal unity.

Under the generic deduction limitation rule, the deduction of interest in any year is currently not possible if and to the extent that it exceeds the higher of (a) 20% of the taxpayer's adjusted profit or (b) EUR 1 million. The introduction of the anti-abuse provision for real estate entities is counterbalanced by an increase for all taxpayers of the alternative limit from 20% to 25% of the adjusted profit.

Business succession regime (BOR) and substantial interest transfer regulation (DSR ab)

By the 2024 Tax Plan, it was adopted that for the business succession regime and substantial interest transfer regulation, real estate leased to third parties will be regarded as investment assets, as a result of which the BOR and the DSR ab can no longer be applied to this real estate. Currently, the following adjustments are proposed:

1. Limiting the scope of the BOR and the DSR ab to ordinary shares representing at least 5% of the issued capital;
2. Addressing unintended use, such as double application of the BOR and so-called 'wheeled walker investments';
3. Relaxing the possession and continuation requirement by facilitating restructurings and shortening the continuation requirement to three years.

If real estate made available to one's own company is transferred at the same time as shares, the BOR can also apply to the property. However, due to an omission, the (mortgage) debt that is usually transferred simultaneously with the property is not taken into account for determining the amount of the BOR exemption. It is proposed to correct this omission by deducting debts related to such immovable property when calculating the business assets.

The intended effective date is 1 January 2025 for shortening the continuation requirement and 1 January 2026 for other measures.

VAT revision on investment services

For VAT, it is proposed to extend the revision scheme as already applicable to (im)movable property acquired as capital goods to investment services starting 1 January 2026. Such investment services are services to one or more immovable properties that serve them on a multi-year basis and where the remuneration for these services is at least EUR 30,000. In the four years following the first year of use, the taxpayer must keep track of whether the use of the service changes and thus whether the initial VAT deduction needs to be corrected (1/5th per year). If the building owner transfers his property to a third party within this period, this may also lead to VAT revision. This is because the tax treatment of that supply (VAT-taxed or exempt) will then determine the VAT deduction during the remaining revision period. If the transaction qualifies as a transfer of a going concern (TOGC), the buyer will inherit the pending revision period(s).

Last week, the European Court of Justice (C-243/23) ruled in a Belgian case that could have a significant impact on this proposed Dutch VAT revision scheme. According to the court, if an investment service has an economic lifetime similar to that of a new building, the same VAT adjustment period should be applied to it as to real estate. In the Netherlands, this would mean that a revision period of effectively 10 years would apply to certain investment services to immovable property.

Abolition of reduced VAT rate for accommodation and culture

As of 1 January 2026, the reduced VAT rate for providing accommodation within hotels, guesthouses, and holiday spending businesses will be abolished. As a result, the VAT rate for accommodation will go from 9% to 21%, except for camping. The VAT rate for cultural goods and services will also go up from that date, such as books, sports matches, museums, and music and theatre performances. The rate increase will not apply to amusement parks, playgrounds, circuses, zoos, and cinemas.

To prevent advance payments under the reduced rate for goods and services supplied after 1 January 2026, a transitional provision regulates that the VAT rate applicable at the time of actual supply should be applied. For example, if a hotel stay or theatre performance is paid in advance in 2025 but takes place in 2026, the 21% rate will apply.

Reduction of RETT rate for residential properties

It is proposed to reduce the general real estate transfer tax (RETT) rate for acquiring residential properties from 10.4% to 8% with effect from 1 January 2026. The new 8% rate will apply to all acquisitions of residential properties if not taxed at the reduced rate of 2% (self-occupation) or exempt (e.g., under application of the starter exemption). The aim is to increase rental housing availability by encouraging investment in (private) rental housing and promoting more construction by reducing sales tax burdens.

Adjustment land consolidation exemption in RETT

To combat unintended use, an amendment is proposed so that houses and other buildings not used for agricultural purposes will no longer fall within this the scope of this exemption. An exception is made for agricultural company houses: these will remain exempt from RETT. Other buildings are only exempt if used within agricultural business for at least ten years after acquisition. If a building is withdrawn from agriculture by government intervention for nature development, the exemption remains valid. For undeveloped land, the exemption remains unaffected.

Early access owner-occupied dwelling no taxable event for RETT

A change is proposed so that obtaining access to an owner-occupied dwelling or permission to carry out work on such dwelling before legal transfer will no longer be regarded as acquiring beneficial ownership. This is subject to conditions: (i) legal ownership must be acquired within six months of early access and (ii) either a 2% rate or starter exemption applies (the property must be used by the buyer as their permanent principal residence).

Amendments already adopted effective 1 January 2025

• RETT on shares / concurrence exemption: The concurrence exemption will be abolished on acquiring shares in a real estate entity. The indirect acquisition of newly constructed immovable property will be subject to RETT at a rate of 4%, calculated on fair market value. However, application remains possible if the underlying property is used for at least 90% VAT-taxed activities during first two years after the share acquisition.
• FBI regime: For a fiscal investment institution (fbi), which is subjectively liable to corporate income tax but where profit is taxed at a 0% rate, it is no longer possible to directly invest in Dutch real estate. If an fbi holds Dutch real estate, it becomes subject to regular corporate income tax. An fbi can still invest in shares in a regular taxable subsidiary holding Dutch real estate (indirect investment) and directly in foreign real estate.
• Tax qualification of (foreign) legal forms: Rules are amended under which a legal form is classified as transparent (participants are directly taxed) or non-transparent (legal form is independent taxpayer). The 2025 Tax Plan includes proposals to adjust editorial inaccuracies and unintended consequences.

Follow-up

In coming months, parliament will discuss the 2025 Tax Plan. Proposed measures may be subject to changes.