The Dutch government plans to amend the earnings stripping rule for Dutch real estate entities, excluding them from the EUR 1 million threshold entirely, potentially resulting in an additional EUR 50 million in tax income annually.
Our firm, Taxand Netherlands, advises companies leasing Dutch real estate to third parties to review their financial models and consider mitigation measures.
Read the full article from our Netherlands team below…
On 28 April 2023, the Dutch Ministry of Finance announced certain proposed amendments with respect to the application of the Dutch earnings stripping measure that could severely impact Dutch real estate entities. Please find a quick overview below, including Taxand Netherlands’ takes:
On 28 April the Dutch Ministry of Finance presented the so-called “Spring Note” (In Dutch: Voorjaarsnota) containing an update on the 2023 government budget and a for the budget for future years.
The note also mentioned the Dutch government’s plan to amend the current earnings stripping rule for Dutch entities that are leasing out real estate, per 2025.
Currently, the Dutch earnings stripping rule limits the deductibility of net interest expense (broad definition) in excess of a EUR 1 million threshold to 20% of the taxpayer’s EBITDA for tax purposes. The earnings stripping rule applies to both related and unrelated party debt, other financing arrangements and foreign exchange results.
Over recent years, the Dutch government expressed its concerns on real estate investment structures seeking to maximize the use of the EUR 1 million threshold, by splitting and dividing real estate portfolio over multiple taxpayers – each benefiting of the EUR 1 million threshold in the earnings stripping rule.
This proposed amendment seeks to address these concerns, with specific reference to real estate entities i.e. companies with leased property (to third parties). An exact definition of a real estate entity was not given yet.
The spring note mentions that the Dutch government plans to exclude Dutch real estate companies completely from applying the EUR 1 million threshold under the earnings stripping measure.
According to estimates made by the Dutch tax authorities, the proposed amendment is expected to result in a yearly additional tax income of EUR 50 million.
Thank you for downloading
For similar content to our Global Guide, subscribe to our mailing list and keep up to date.
Taxand's Take
Whilst no legislative proposal yet, the proposed amendment – if voted into law – could substantially impact the Dutch tax position of companies leasing out Dutch real estate to third parties. As the announcement addresses previous concerns expressed by the Dutch government, it is realistic that the announcement will see application by 2025. Hence, we recommend to review financial models and discuss what actions could be taken to mitigate the potential impact of the proposed amendment.
