On April 8, 2024 the Dutch Government opened a public consultation regarding proposed adjustments to the conditions to be met for the exemption of real estate transfer tax to apply in case of a legal demerger. More specifically amendments proposed to Article 5c of the Implementation Decree on Taxes on Legal Transactions. The consultation period runs from April 8, 2024 to May 6, 2024.

Introduction

In principle 10.4% of Dutch real estate transfer tax is due by the acquirer over the fair market value of a.o. transferred business premises, buildings and shares in qualifying real estate companies. However, in the event of a legal demerger, companies can make use of the so-called demerger exemption. In that case no real estate transfer tax is due over the immovable property, such as for example business premises and buildings, if they are acquired through a legal demerger. According to the Dutch Ministry in practice, it often happens that a sale is structured as a legal demerger to avoid the levying of real estate transfer tax. The Dutch Government considers this to be undesirable and therefore published draft regulations in this respect.

The purpose of proposed amendments to the existing regulations is twofold. On the one hand, these amendments are intended to improve enforceability by the Dutch tax authorities. On the other hand, the aim is to bring the conditions of the demerger exemption more into line with the other business facilities that are available for Dutch real estate transfer tax purposes.

Wat is changing?

The draft regulation, which is now available for consultation, changes the conditions under which the demerger exemption applies. Under proposed new regulations the following conditions have to be met for the demerger exemption to apply:

• A 3 year minimum retention requirement;
• A Business requirement;
• A requirement that the business that was obtained through the legal demerger is carried on for at least 3 years;
• After the demerger, a subsequent exempt legal act (merger, demerger, internal reorganization) or a share merger may take place in which the subsequent acquirer replaces the acquirer in the previous demerger;
• If that is the case, the exemption will not be withdrawn provided that the successor acquirer acquires a similar interest as the previous acquirer previously had;
• If a succession of exempt legal acts is primarily aimed at avoiding the levying of tax, the merger exemption does not apply;
• The exemption also applies to so-called quarrel demergers (shareholders separated). In that case the business requirement and the associated continuation requirement do not apply. However, the retention requirement applies; and
• The exemption also applies if by the legal demerger shares in a real estate entity that qualify as a significant interest are acquired (codification of a policy decree).

More information regarding this consultation, including a link with which you can react to the consultation, can be found here.

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