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17 sep 2024: Budget day - Tax plans for real estate sector

On Budget Day, the Dutch government presented the fiscal measures for 2025 and beyond to the House of Representatives. The NVM Legal Service has provided an overview of the key fiscal measures affecting the real estate market. Many of these measures still need to be approved by both the House of Representatives and the Senate.

Transfer Tax Rate for Non-Primary Residences Lowered to 8% from January 1, 2026
The transfer tax for investors, landlords, and developers will be reduced to 8%. However, this is a plan and has not yet been included in a formal legislative proposal. The new rate will apply to all acquisitions of homes (including those by individuals who do not intend to use the property as their primary residence), except in cases where the reduced rate of 2% (for primary residences) or an exemption, such as the first-time buyer exemption, applies. Note that for non-residential properties, the transfer tax rate will likely remain at 10.4%. This change will come into effect from January 1, 2026.

Exception for Key Agreement as Acquisition of Economic Ownership
A key agreement may be regarded as the acquisition of economic ownership, resulting in a transfer tax liability. The seller must report this acquisition to the Tax Authorities, and the buyer must file a tax return. The government deems this situation undesirable. Therefore, it is proposed to exempt key agreements from being a taxable event if:

• Legal ownership is transferred within six months of the key agreement.
• The acquisition of legal ownership of the home is subject to the 2% primary residence rate or the first-time buyer exemption.

Example
A (seller) and B (buyer) enter into a purchase agreement on January 5, 2025, with the transfer of the home scheduled for April 15, 2025. B qualifies for the reduced rate (2%) or the first-time buyer exemption. A and B enter into a key agreement on April 1, 2025, allowing B to begin renovations before the official transfer. Normally, this key agreement would result in B acquiring economic ownership. However, since the legal transfer follows within six months, and B is eligible for the reduced rate or exemption, no economic ownership is deemed acquired, and neither party has reporting obligations.

First-Time Buyer Exemption Applies to Economic Ownership
This change allows individuals who acquire only the economic ownership (or part thereof) of a home they occupy or intend to occupy to apply the reduced rate or the first-time buyer exemption. Under current regulations, the acquisition of economic ownership has been excluded from the reduced rate or exemption since January 1, 2021. With the proposed change, the acquisition of economic ownership can qualify, provided all other legal conditions are met. Investors, who do not meet the primary residence requirement, will still be subject to the general transfer tax rate.

VoV Exemption for Accessories
Since January 1, 2022, the so-called VoV exemption has applied to certain purchases under ‘sale with conditions’ arrangements. However, accessories, such as a garage or shed, were not included. A legislative amendment will now extend the VoV exemption to include such accessories.

First-Time Buyer Price Limit Raised to €525,000 in 2025
In 2025, the price limit for first-time buyers to use the exemption will increase to €525,000 (from €510,000 in 2024). Buyers between the ages of 18 and 35 can qualify for this exemption if the purchase price does not exceed this limit.

Land Exchange Exemption Not Applicable to Residential Properties from January 1, 2025
The land exchange exemption will no longer apply to the acquisition of homes, including the underlying land and accessories. However, agricultural residential properties will still qualify.

New Tax on Unbuilt Land
The government is considering introducing a tax on undeveloped land intended for residential construction, with details expected in spring 2025.

Short-Term Rental Structures Adjusted for VAT in 2025
The government will introduce a VAT revision rule to address situations where properties are rented out short-term with VAT and later switched to VAT-exempt rentals, preventing the artificial use of VAT deductions.

Housing Allowance Simplified
The housing allowance system will be simplified, with a smoother phase-out based on income, providing more predictability and reducing marginal pressure for recipients.

Right to Purchase for Tenants
The government is investigating the conditions under which tenants may be granted the right to purchase their rental property.

Ending of Netting Scheme for Solar Panels by January 1, 2027
The netting scheme for electricity generated by solar panels will end, encouraging more self-consumption of renewable energy to reduce grid congestion.

Simplified Business Succession Scheme and Earnings Stripping Measure
The Business Succession Scheme (BOR) and the earnings stripping measure will be simplified and refined, with adjustments to prevent misuse by real estate investors.

Personal and Corporate Income Taxes
In personal income tax (Box 1), a split rate of 35.82% for the first bracket and 37.48% for the second will be introduced. The top rate remains 49.5%. In Box 2, the rate will decrease from 33% to 31%. No changes to corporate tax rates are proposed.

Note:
Many of these measures still require approval by both houses of Parliament.

Source: NVM