NETHERLANDS Law and Practice Contributed by: Willemijn van Duren and Rowena Zee, Arcagna
Alternative Planning Considerations In practice, planning is often structured around three main approaches. • Lifetime transfer of qualifying business assets – where available, a combination of business suc- cession relief for gift tax purposes and income tax roll-overs can materially reduce the overall tax cost; this is generally more limited for investment assets. • Gifting to children followed by family investment planning – an outright gift (often cash/securities) followed by a jointly aligned investment approach, with the aim that future investment returns and value growth accrue (in part) to the next genera- tion. • Generation-skipping investing – gifts made directly to grandchildren combined with long-term invest- ing, to have future growth accrue to the intended end beneficiaries earlier and potentially reduce taxation at the intermediate generation. 5.2 Testamentary Dispositions In the Netherlands, the tax treatment of transfers on death depends significantly on the type of asset. Where the deceased is Dutch tax resident, Dutch inheritance tax is, in principle, levied on the worldwide estate, generally based on the fair market value of the assets at the date of death. For Dutch personal income tax, there is no single “step-up in basis” rule that applies across all asset categories. For privately held real estate and other box 3 assets, taxation is currently based on an annual deemed return methodology, so a step-up is typically not relevant (noting that this may change under the intended box 3 reforms currently targeted for 1 Janu- ary 2028). For substantial shareholdings (box 2), the death of the shareholder may trigger Dutch income tax on latent gains unless a roll-over applies; where roll-over treatment is available (including in a business succession context), the heirs generally take over the deceased’s historic acquisition price (ie, no step-up).
ised as property-law mechanisms affecting ownership upon death, rather than as permissible “inheritance contracts”. In practice, succession planning is usu- ally implemented through a will, combined with the marital/partnership agreement to structure ownership and (death-triggered) settlement claims. Enforceability may be affected in specific circum- stances. Disputes may arise over the interpretation of specific clauses – particularly settlement/equalisa- tion clauses – which under Dutch law is assessed in accordance with the Haviltex standard (ie, the mean- ing that the parties could reasonably attribute to the clause in the circumstances and what they could rea- sonably expect from each other, rather than a purely literal reading). Moreover, a spouse/partner may seek annulment of the agreement on grounds of defective consent (eg, mistake, fraud, undue influence), or a court may mitigate or set aside the effect of (parts of) the agreement where its application would be unacceptable in the specific circumstances under the standards of reasonableness and fairness (eg, an extreme outcome caused by unforeseen circumstanc- es). Finally, where creditors are involved, effectiveness vis-à-vis third parties may depend on registration in the matrimonial property register, and asset shifts resulting from the agreement (or its amendment) may be scrutinised under creditor-protection rules, includ- ing avoidance actions ( actio pauliana ) in case of credi- tor prejudice. 5. Tax Treatment of Lifetime Transfers and Testamentary Dispositions 5.1 Lifetime Transfers Lifetime Transfers Lifetime transfers are generally subject to Dutch gift tax. The Netherlands does not have a broad “life- time transfer exemption” or unified credit that allows substantial wealth to be transferred free of gift tax; instead, material gifts typically trigger gift tax unless a specific exemption or relief applies. Depending on the asset, income tax roll-over rules (eg, for qualify- ing business assets, held privately or via a company structure) and Dutch real estate transfer tax may also be relevant.
121 CHAMBERS.COM
Powered by FlippingBook