On 9 December 2022, the Dutch Ministry of Finance announced that the abolishment of the Dutch REIT regime will be postponed from 1 January 2024 to 1 January 2025. The motivation behind this postponement is to give Dutch REITs and their institutional investors additional time to restructure.

As an example of institutional investors that may want to restructure, the Dutch Ministry of Finance mentions pension funds that would be exempt from Dutch corporate income tax on income and gains derived from a direct investment in real estate located in the Netherlands. As a restructuring could trigger Dutch real estate transfer tax, a transitional measure will be introduced effective 1 January 2024. This measure will broadly consist of a conditional exemption from Dutch real estate transfer tax during 2024 for transfers that are executed in direct relation to the abolishment of the Dutch REIT regime.

A legislative proposal to this effect will be published and consulted in the first quarter of 2023. The legislative proposal will subsequently be submitted for Parliamentary approval on Dutch Budget Day 2023 (i.e., 19 September 2023).

A&M Says

The statement by the Dutch Ministry of Finance that direct real estate investments held by pension funds can benefit from an exemption from Dutch corporate income tax is generally true. As such, it makes sense to restructure out of the Dutch REIT regime. A direct investment for Dutch corporate income tax purposes can also be achieved via a tax transparent vehicle.

Dutch REITs are also commonly used as investment vehicles by foreign pension funds that do not meet all the requirements to benefit from the Dutch corporate income tax exemption for pension funds. For these foreign pension funds, the abolishment will lead to a different tax position going forward. The same holds true for institutional real rate investment funds that make use of Dutch REITs.

An overview of the tax mechanics, reasons for the abolishment and what to consider looking ahead can be found in our publication ‘Abolishment Dutch REIT Regime: Looking Ahead’.

If you would like to model the tax cost impact of the proposed abolishment or discuss viable restructuring options, please feel free to get in touch with your usual A&M adviser, Roel de Vries or Nick Crama.