NETHERLANDS Law and Practice Contributed by: Coco van Zuiden, Marijn Bodelier, Sabine Schoute and Simone Wijngaard, Greenberg Traurig, LLP
• real estate income received by the FBI is sub - ject to 0% corporate income tax (and is thus effectively exempt); • subject to certain conditions, capital gains/ losses realised by the FBI may be allocated to a tax-free reinvestment reserve (and are thus also effectively exempt); • distributions of operating income by the FBI are generally subject to dividend withholding tax, except for distributions from the tax-free reinvestment reserves (certain conditions apply); and • Dutch or foreign withholding tax payable by the FBI can be reduced under certain condi - tions. Certain conditions must be met to apply the FBI tax regime. Besides the FBI tax regime, special rules apply to certain regulated qualifying exempt invest - ment institutions ( vrijgestelde beleggingsinstel - lingen or VBIs). A VBI is exempt from corporate income tax and dividend withholding tax. How - ever, it is only allowed to invest in financial instru - ments and not directly in real estate. Foreign individual investors investing in Dutch real estate are generally liable for Dutch per - sonal income tax in Box 3 (taxable income from
savings and investments) of the Dutch Personal Income Tax Act, with a fixed rate of 36% calcu - lated on a notional yield of 5.88%. Actual gains from savings and investments are not subject to tax. Due to case law of the Dutch Supreme Court, taxpayers may object against taxation on the notional yield and opt for taxation on actu - al gains. Different rules and rates may apply if the real estate investment is attributable to an enterprise carried out by the foreign individual investor. 8.5 Tax Benefits Annual tax depreciation on Dutch real estate is determined on the basis of (i) cost price of the real estate (minus the part that is allocated to the land, as land is not depreciable), (ii) the residual value and (iii) the economic life of the property. There are no statutory provisions regarding crite - ria (ii) and (iii). Under Dutch tax law, tax deprecia - tion on real estate is allowed only to the extent the tax book value of the real estate is higher than the so-called “WOZ” -value, assessed peri - odically by the municipality determined based on the Dutch Valuation of Immovable Property Act ( Wet waardering onroerende zaken ). Additional tax deductions may be available for certain environmental and/or energy-friendly investments in Dutch real estate.
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