Last Updated August 10, 2023
- Law and Practice
- Trends and Developments
Law and Practice
Authors
has a designated team dealing with family-owned businesses and private wealth. It offers tailored, personal advice for family offices and high net worth individuals, investment managers, private equity firms and multinational enterprises. The team advises on the tax and legal structuring of family-owned businesses; the management and supervision of family-owned businesses and wealth; the protection of wealth and privacy; and the tax and legal structuring of succession planning, as well as valuable assets. It also offers legal support for those who are emigrating and/or repatriating; advice on prenuptial agreements and last wills; expertise in establishing (family) foundations and charitable organisations; and assistance in planning pension provision. There is full collaboration between the firm’s tax advisers, civil law notaries and lawyers, enabling them to find pragmatic solutions to complex tax and legal issues. Clients can draw on specialist tax and legal knowledge in the firm’s home markets (Benelux and Switzerland) and across its global (business) network.
1. Tax
1.1 Tax Regimes
Domicile and Residency
In the Netherlands, resident individuals are taxed on their worldwide income and wealth. Non-residents are only taxed on certain types of income and wealth with a nexus to the Netherlands (see Non-residents, below). Domicile is, in principle, not relevant for Dutch tax purposes.
According to Dutch case law, a person is considered a resident for tax purposes if, based on all the relevant facts and circumstances, a “durable bond of a personal nature” exists with the Netherlands. This is determined based on, inter alia:
- the availability of a primary residence;
- where the person has a place of habitual abode; and
- where the family is located.
Intentions or the number of days spent in or outside the Netherlands are of lesser relevance.
A person may have durable bonds with different countries, whereby the strongest durable bond is not necessarily decisive for tax residency. In such a case, a tax treaty may provide for a tiebreaker to determine a person’s tax residence (though the Netherlands has concluded only a very limited number of treaties regarding gift and/or inheritance tax).
Personal Income Tax in the Netherlands
In the Netherlands, personal income tax is levied pursuant to the Personal Income Tax Act 2001. The taxable income (either worldwide income and wealth for resident taxpayers or specific income and wealth with a Dutch nexus for non-resident taxpayers) is allocated to three different “boxes”, according to source.
- Box 1: income from labour, business and principal residence – rates vary from 36.93% to 49.50% (2023).
- Box 2: income from substantial interest – flat rate of 26.9% (2023).
- Box 3: deemed income from savings and investments – flat rate of 32% on deemed income (please note that the Dutch Supreme Court has ruled this system to be in violation of the European Convention on Human Rights (ECHR). As a result, a new Box 3 income tax system will be introduced – see Box 3, below).
In general, income and deductible amounts derived from and relating to a certain source can only be offset in the same box. However, certain personal allowances (eg, alimony, childcare expenses and medical expenses) are deductible in Box 1, Box 3 and Box 2 (in this order) if the income from the preceding box is not sufficient for a deduction in full.
Partners are, in principle, taxed individually. This is only different for certain categories of joint income, deductible expenses and wealth, which can be apportioned freely between partners. For Dutch personal income tax purposes, “partners” refers to the following:
- married people and people that have entered into a registered partnership recorded with the municipality (automatically); and
- people living together without being married (subject to certain conditions).
Next to personal income tax, a person resident in the Netherlands will generally also be subject to the Dutch compulsory social security system (consisting of various insurance schemes). Contributions to these insurance schemes are based on earnings and are collected via the annual Dutch personal income tax assessment. Social security contributions are effectively capped annually at EUR10,271 (2023).
The Netherlands grants levy rebates (heffingskortingen), the most important of which are:
- the general levy rebate of maximum EUR3,070 (2023) per year; and
- the employment levy rebate of maximum EUR5,052 (2023) per year.
The taxable period is January 1st to December 31st; tax returns must be filed before May 1st the following year. A delay for filing is possible upon request.
Box 1
Income from past and present employment, business activities, certain “other activities” (eg, freelance work), certain periodic payments and deemed income from the principal residence is taxed at a progressive rate in Box 1 (see above).
Income from employment is generally subject to wage-withholding tax. This “pre-levy” can be offset against personal income tax. Income from business activities includes capital gains. Gains resulting from the normal administration of private wealth are usually not taxed in Box 1.
The principal residence is allocated to Box 1. Personal income tax is levied on the notional rental value (the eigenwoningforfait, a certain percentage of the residence’s value for tax purposes); capital gains are tax-exempt. If certain requirements are met, interest paid on a loan for the acquisition, improvement and maintenance of a principal residence can be deducted for a maximum period of 30 years (“mortgage interest relief” or hypotheekrenteaftrek). The rate against which the deduction of mortgage interest in the highest income tax bracket takes place is limited to 36.93% (2023).
Box 2
In Box 2, income and gains in connection with a substantial shareholding are taxed. A substantial interest inter alia exists in the case of a shareholding of 5% or more in a company (including, depending on circumstances, options on shares, profit rights and economic ownership). Income from a substantial interest includes both dividends and capital gains, and is taxed at a flat rate of 26.90% (2023). The applicable rate will be amended to 24.5% for the first EUR67,000 of income/gains and 31% on the excess per 2024.
For non-residents, Box 2 applies mutatis mutandis, provided that the company in which the non-resident holds a substantial interest has its (deemed) place of effective management in the Netherlands. Tax treaties may prevent the Netherlands from levying its full domestic rate.
Dividends
Dividends paid by a company with its (deemed) place of effective management in the Netherlands are subject to 15% dividend withholding tax, which can be offset against the Dutch personal income tax due. For Dutch personal income tax (and dividend withholding tax) purposes, dividends and capital gains also include certain deemed dividends and deemed capital gains.
For example, a shareholder with a substantial interest in a non-resident low-taxed (less than 10% profit taxation) or exempt portfolio investment company is subject to personal income tax in Box 2 on a deemed annual “dividend” (2023: 6.17% of the substantial interest’s fair market value). The deemed dividend is reduced by actual dividends received during the year.
In addition, the Dutch government has passed a bill to tax a deemed benefit from a substantial interest in so far as (current account) shareholder loans were taken up in excess of EUR700,000 from a company in which a substantial interest is held. For the EUR700,000 threshold loans taken up by the shareholder, a spouse and certain close relatives are aggregated. Under certain conditions, loans taken up by the shareholder for the acquisition, improvement and maintenance of a principal residence are excluded.
The legislation entered into force on 1 January 2023 (and will be effective 31 December 2023).
Capital gains
Examples of deemed capital gains are the repurchase of shares by a company, the liquidation of the company, the inheritance of a substantial interest and the transfer of the place of effective management of the company out of the Netherlands.
A deemed capital gain also arises when the substantial shareholder emigrates from the Netherlands. Upon emigration, the Dutch tax authorities will issue a protective assessment (conserverende aanslag) for the 26.90% (2023) personal income tax due on the capital gain deemed as realised. An interest-free delay for tax payment for an unlimited period is granted automatically (for emigration within the EU/EEA) or upon request (for emigration outside the EU/EEA; security must be provided).
The delay for tax payment is withdrawn, and a protective assessment is (partially) collected, if (among others) the emigrated substantial shareholder receives a dividend or realises a (deemed) capital gain. The delay for tax payment is also withdrawn on the emigrated taxpayer’s death. Heirs can only request a further delay of payment of tax to the extent that the substantial shareholding represents active business assets.
Box 3
In Box 3, the net deemed return on, inter alia, privately held savings and portfolio investments are taxed at a flat rate of 32% (2023). The flat rate will gradually increase to 33% in 2024 and 34% in 2025. The flat rate is currently applied to deemed yields on the fair market value of the assets and liabilities on January 1st of each year (net wealth). The actual income, gains and cash flow arising from the assets are in principle irrelevant for Box 3.
Considering the Dutch taxation in Box 3 is based on deemed results, the current system could in effect be considered a net wealth tax.
For resident taxpayers, the taxable base includes all tangible and intangible assets and second houses (the principal residence is taxed in Box 1 – see above). Movable property for personal use (eg, cars, yachts and art collections) is excluded from the taxable base, provided such property is not mainly held as investment. For non-resident taxpayers, Box 3 taxation is effectively limited to Dutch real estate and direct or indirect rights therein. Debts connected to Dutch real estate may be taken into account.
For both resident and non-resident taxpayers, certain approved investments and savings below a threshold may be excluded from the taxable base. A tax exemption of EUR57,000 (2023) per year applies to every taxpayer individually; for tax purposes, partners (eg, spouses – see above) are eligible for a double tax exemption. The Box 3 income tax system has been widely criticised and the subject of multiple court cases over past years, because of the use of a (relatively high) deemed yield in a period where the (risk-free) market yields are historically low. As a result, certain taxpayers were confronted with an income tax burden in Box 3 of more than 100% of the actual yield.
On 24 December 2021, the Dutch Supreme Court ruled that the former Box 3 income tax system was in violation of the ECHR. The Supreme Court concluded that affected taxpayers must be given (effective) legal protection through a compensation aimed at restoration of rights.
As a result of this ruling, the Dutch Parliament announced a restoration of rights for the years 2017 to 2022 in the form of an adapted Box 3 income tax system based on “actual returns”. The adapted system is called the “flat-rate savings option” (forfaitaire spaarvariant) and calculates the compensation payable based on applying a flat-rate yield on the actual returns on assets, as follows.
- 2017:
- 0.25% for savings;
- 5.39% for investments; and
- 3.43% -/- for debts.
- 0.12% for savings;
- 5.38% for investments; and
- 3.2% -/- for debts.
- 0.08% for savings;
- 5.59% for investments; and
- 3% -/- for debts.
- 0.04% for savings;
- 5.8% for investments; and
- 2.74% -/- for debts.
- 0.01% for savings;
- 5.69% for investments; and
- 2.46% -/- for debts.
- 0% for savings;
- 5.53% for investments; and
- 2.28% -/- for debts.
For the time being, the restoration of rights for the years 2017 to 2020 is limited to persons who filed an objection and all taxpayers whose tax assessment is not yet final.
For the years 2023 and beyond, the Dutch Parliament has introduced legislation enacting the flat-rate savings option into legislation. Consequently, the Box 3 income is presently based on deemed returns on three different asset classes:
- (i) savings (including cash);
- (ii) investments/other assets (eg, investment portfolios, Dutch real estate, etc); and
- (iii) debts.
The deemed return is linked to each asset class and the total taxable Box 3 income is – in short – calculated by adding up the deemed return on asset classes (i) and (ii) and subtracting the deemed return on asset class (iii). These deemed returns are calculated on January 1st of the following year. The provisional rates of deemed return for 2023 are:
- 0.36% for savings;
- 6.17% for investments; and
- 2.57% for debts.
Lastly, the government has announced its intention to introduce a new Box 3 income tax system by 2027. It is yet unclear whether this new tax system will adopt the form of a capital growth tax (vermogensaanwasbelasting), a capital gains tax (vermogenswinstbelasting) or a modified flat-rate savings option.
Taxation of the Assets of a Trust or Foundation
The Netherlands does not have trust law but does adhere to the Hague Convention on the Law Applicable to Trusts and on their Recognition of 1 July 1985 (Hague Trust Convention). The Personal Income Tax Act 2001 and Inheritance Tax Act 1956 regulate the tax treatment of (foreign) trusts and trust-like entities (eg, foundations), which mainly serve the personal interest of the settlor.
If an individual taxpayer (the settlor) transfers assets and liabilities into such a trust (or trust-like entity) without receiving economic entitlement rights (such as ownership of shares or profit sharing) in return, the transferred wealth will be regarded as a “separate private estate” (SPE, or afgezonderd particulier vermogen (APV)) to which the “SPE regime” applies.
Under this regime, the transfer of assets and liabilities to such SPE for tax purposes is ignored. The SPE’s assets and liabilities remain allocable to the settlor. The transfer of assets to a trust (or trust-like entity) can therefore be tax-free, since such transfer is deemed not to have taken place.
Personal income tax is levied on the settlor (or their heirs). Exceptions may apply if, for example, a beneficiary receives a fixed interest (being a fixed economic entitlement). In this case, the beneficiary is subject to personal income tax on the fixed interest. The value of this interest is generally taxed in Box 3 (depending on the nature of the assets and liabilities); the SPE regime does not apply to such a fixed interest.
On payments made from the SPE to beneficiaries other than the settlor, gift tax is assessed when the settlor is (deemed) resident in the Netherlands. The beneficiaries must also pay inheritance tax on trust assets upon the demise of the settlor if the settlor was a (deemed) Dutch resident.
Expatriates
For expatriates immigrating to the Netherlands (incoming employees), it is possible to apply for a so-called 30% ruling. Subject to certain terms and conditions, a 30% ruling allows for a deduction of 30% of the incoming employee’s income for deemed extraterritorial expenses.
More importantly, the incoming employee can opt to be treated as a non-resident taxpayer for Box 2 and Box 3. As a result, the incoming employee will, in principle, not be taxed in the Netherlands on:
- a substantial interest in a company incorporated and effectively managed outside the Netherlands; and
- private wealth, except for (rights related to) Dutch real estate.
A 30% ruling is valid for five years. This five-year period is reduced by the period (in months) spent in the Netherlands ending in the 25-year period prior to immigration. A 30% ruling granted before 2019 is valid for eight years.
The Dutch government has published a legislative proposal limiting the basis of the 30% ruling to a maximum of EUR223,000 of (annual) income (amount based on 2023). The legislation is due to enter into force in 2024.
Non-residents
Non-resident individuals pay tax on income and wealth with a nexus to the Netherlands. Generally speaking, this income consists of income from substantial interests held in Dutch resident companies (Box 2), Dutch real estate and direct or indirect rights therein (Box 3), and rights to shares in the profit of an enterprise with its place of effective management in the Netherlands (Box 1). The actual Dutch tax liability is subject to the application of a treaty for the avoidance of double taxation.
Tax Treaties
The Netherlands has concluded a significant number of tax treaties, which, under Dutch law, override national (tax) legislation. As part of the OECD BEPS project, the Netherlands has endorsed the Multilateral Instrument (MLI).
The MLI applies to a large number of tax treaties concluded by the Netherlands and forms the basis of (future) tax treaty negotiations. In light of this development, it is expected that tax treaties may no longer be invoked for structures/transactions, which are mainly tax-driven and lack economic reality and substance.
Gift, Estate and Inheritance Taxes
In the Netherlands, gift and inheritance tax is levied pursuant to the Inheritance Tax Act 1956. An inheritance tax return must be filed within eight months of the death of the deceased. Postponement is granted upon request. The tax must be paid within six weeks of a notice of assessment.
If an heir living abroad receives property from a Dutch resident’s estate, the heirs living in the Netherlands are also liable for the payment of the non-resident heir’s taxes.
Gift tax returns must be filed within two months of the end of the calendar year in which the gift was made.
Gift and Inheritance Tax
Gift tax is payable on gifts made by a (deemed) resident of the Netherlands. Regardless of their nationality, and for gift tax purposes only, all persons who emigrate from the Netherlands are deemed resident for a period of one year after emigration. Dutch citizens (at the time of emigration and the gift) are deemed resident for a period of ten years after emigration.
Inheritance tax is payable on the worldwide property of a (deemed) resident of the Netherlands at the time of their death. The inheritance tax is payable by the recipient. Dutch citizens (at the time of emigration and death) are deemed resident for a period of ten years after emigration. The estate of a non-resident deceased person (either non-Dutch or Dutch but who emigrated more than ten years ago) is not subject to Dutch inheritance tax.
Tax calculation
For the calculation of gift and inheritance tax, assets are valued at fair market value. The (progressive) rates for both gift and inheritance tax are the same (in 2023):
- up to EUR138,642 – 10% (spouses/children), 18% (other descendants) and 30% (others); and
- EUR138,642 and more – 20% (spouses/children), 36% (other descendants) and 40% (others).
There are individual tax exemptions for both inheritance and gift tax, which depend on the relationship between the deceased or donor and the beneficiary (see 1.2 Exemptions).
Taxation of the Assets of a Trust or Foundation
The Netherlands does not have trust law. The tax treatment of (foreign) trusts and trust-like entities is regulated by the Personal Income Tax Act 2001 and the Inheritance Tax Act 1956 (see above, under Personal Income Tax in the Netherlands).
Real Estate Transfer Tax
The acquisition of Dutch real estate is subject to real estate transfer tax (overdrachtsbelasting or RETT) at a flat rate of 10.4% (commercial real estate) or 2% (residential real estate acquired by an individual who uses the real estate asset as its primary residence). A one-time RETT exemption applies to people between the ages of 18 and 35 who acquire residential property that acts as their principal dwelling, whereby the value of such property may not exceed EUR440,000. RETT on the acquisition by resident beneficiaries of gifted real estate may be (partly) offset against gift tax; real estate acquired by inheritance is RETT-exempt.
To prevent tax avoidance, under certain conditions shareholdings in real estate companies are deemed real estate for RETT purposes. This may also include shareholdings in non-resident (holding) companies if these shareholdings directly/indirectly derive their value from real estate located in the Netherlands.
Capital Gains Tax
The Netherlands does not levy a separate capital gains tax, but certain capital gains may be subject to Dutch personal income tax. These include capital gains derived from a substantial interest (personal income tax in Box 2 – see above) and capital gains realised as an entrepreneur (personal income tax in Box 1 – see above).
Dutch VAT
Dutch VAT is charged on supplies of goods and services in the Netherlands. The basic rate is 21% (2023). Certain supplies (eg, educational services, medical services and financial services) are VAT-exempt. A reduced rate of 9% (2023) applies to other supplies (eg, food, non-alcoholic drinks, medicines and books) and services (eg, passenger transport, hairdressing and renting out holiday homes).
Imported works of art may also be eligible for the reduced rate.
1.2 Exemptions
There are individual tax exemptions for both inheritance and gift tax, which depend on the relationship between the deceased or donor and the beneficiary.
For inheritance tax, these exemptions are as follows (in 2023):
- for partners – EUR723,526 (half of the cash value of pension rights derived by the partner from the death of the deceased is deducted from this amount, and the minimum exemption is EUR186,915);
- for children whose cost of living was, for the greatest part, paid by the deceased and who cannot be expected, within the coming three years, to earn half of the income a physically and mentally healthy person would earn – EUR68,740;
- for other children and grandchildren – EUR22,918;
- for parents – EUR54,270; and
- for others – EUR2,418.
For gift tax, the annual tax exemptions are as follows (in 2023):
- for children – EUR6,035; and
- for others – EUR2,418.
Certain one-time increases may apply (see 2.6 Transfer of Assets: Vehicle and Planning Mechanisms).
The Inheritance Tax Act 1956 provides for a separate tax facility for business assets and substantial shareholdings that represent business assets: the business succession facilities (bedrijfsopvolgingsfaciliteit or BOR – see 4.2 Succession Planning).
1.3 Income Tax Planning
Upon immigration of a taxpayer who holds a substantial interest, under certain conditions, a step-up can be granted to the fair market value of the shares at the time of immigration. A step-up may not be (fully) granted if the taxpayer has previously resided in the Netherlands, or if the taxpayer has previously qualified as a non-resident taxpayer with regard to the substantial interest.
1.4 Taxation of Real Estate Owned by Non-residents
Non-resident individuals pay tax on income and wealth with a nexus to the Netherlands, such as income from substantial interests held in Dutch resident companies and Dutch real estate and direct or indirect rights therein. The actual Dutch tax liability is subject to the application of a treaty for the avoidance of double taxation.
1.5 Stability of the Estate and Transfer Tax Laws
The gift and inheritance tax legislation in the Netherlands is very stable. Amendments can only be made after a thorough legislative process.
At the start of its governing period, each government presents a coalition agreement in which its long-term (tax) objectives and policies are announced. In addition, the Dutch government announces its Tax Plan each year on Budget Day in September. The Tax Plan provides an overview of all tax measures proposed by the government for the coming year and must be adopted by the House of Representatives and the Senate.
Neither the present coalition agreement nor the Tax Plan 2023 include significant changes to Dutch gift and inheritance tax. However, the Dutch government has indicated that it will tighten the Dutch business succession facilities with effect from 2024 and 2025 (see 4.2 Succession Planning).
1.6 Transparency and Increased Global Reporting
The Netherlands is involved in the US Foreign Account Tax Compliance Act (FATCA), the Common Reporting Standard (CRS) and various other multinational transparency initiatives.
FATCA and CRS
Based on FATCA legislation, Dutch financial institutions need to register with the US Internal Revenue Service (IRS) and report information to the Dutch tax authorities about US reportable accounts and accounts held by non-compliant foreign financial institutions. The reportable information includes name, address, US Tax Identification Number (TIN) account numbers and account balances of reportable accounts. A non-US entity not qualifying as a financial institution needs to disclose its substantial US owners or certify that it has none.
The Netherlands has also committed itself to the CRS, under which financial institutions need to identify their account holders. If it is established that an account holder is a tax resident in another country and that country participates in the CRS, the financial institution has to submit information annually about the account holder and the account (such as investment income, interest, account balances and capital gains).
The Dutch tax authorities will subsequently exchange this information with the tax authorities of the account holder’s country of residence.
Automatic Exchange of Information Between Countries
BEPS Action 5 contains an OECD framework for the compulsory exchange of information as to certain categories of rulings. The Netherlands has committed itself to this OECD framework. The Dutch tax authorities collect basic information, such as:
- the identity of the taxpayer;
- the date of issuance of the ruling;
- the start date;
- the identification of any entity likely to be affected; and
- a short summary of the content.
This information will then be bilaterally exchanged with:
- the countries of residence of all related parties; and
- the residence country of the ultimate parent company and the immediate parent company.
In the Directive on Administrative Co-operation, the EU also includes automatic exchanges of information on “advance cross-border rulings” and “advance pricing arrangements” between EU member states. Contrary to BEPS Action 5, the scope of the EU Directive is not limited to certain categories of rulings; only rulings and pricing arrangements concerning purely domestic situations are out of scope, and rulings and pricing arrangements exclusively concerning the tax affairs of one or more natural persons. The information to be exchanged under the EU Directive is comparable to BEPS Action 5 and must be submitted to a central database to which all EU member states have access.
The information will not be available to the public; upon request and when needed for tax purposes, additional information may be provided to another EU member state.
UBO Register
Following up on the EU Anti-Money Laundering Directive, a law has been adopted in the Netherlands (UBO Register Act) that implements a register in which the ultimate beneficial owners (UBOs) of certain corporate entities and other legal entities must be registered (the “UBO Register”). Since 27 September 2020, these entities are required to obtain, hold and register certain personal information on their ultimate beneficial owners. The deadline for existing entities to register their UBO(s) lapsed on 27 March 2022. Newly incorporated entities will need to register their UBO information simultaneously with their registration.
Private limited companies and public limited companies, foundations, associations, mutual insurance associations, co-operatives, limited partnerships and churches or spiritual organisations that are incorporated or established under Dutch law are all subject to registration. Although the definition of a UBO differs for each type of legal entity, in general an individual must be registered if they hold an economic and/or controlling interest of more than 25% in the entity. If there is no such individual, all members of the senior management of the legal entity have to be registered (so-called pseudo-UBOs).
The UBO Register includes the personal information of a UBO, such as surname, month and year of birth, nationality, country of residence and the nature and extent of the beneficial interest. Previously, this information was publicly accessible in the Dutch Trade Register. However, on 22 November 2022, the European Court of Justice ruled that the public accessibility of UBO-information violates the fundamental right to protection of private life and the right to protection of personal data and is therefore invalid. Consequently, the Dutch government restricted access to the register.
In the meantime, the competent authorities have regained access to the register. The Dutch government is now considering limiting access to individuals and organisations that can demonstrate a legitimate interest. Which individuals and groups would have such a legitimate interest has yet to be defined.
Additional information such as the UBO’s Citizen Service Number (Burgerservicenummer or BSN), a copy of their identity document and the date and place of their birth will be accessible only to certain competent (EU) authorities.
Upon request, access to UBO information can be restricted to persons with a legitimate interest if the UBO is a minor or is otherwise legally incapable, or if the UBO is under the protection of the Public Prosecutor or the National Co-ordinator for Counterterrorism and Security.
Trust register
On 23 November 2021, the legislative proposal for the implementation of a UBO Register for trusts and similar legal arrangements (the “Trust Register”) was approved by the Dutch Senate. Similar legal arrangements include the commonly used Dutch mutual fund (fonds voor gemene rekening). The registration requirements are applicable to a trustee that resides or is established in the Netherlands, or resides or is established outside the EU, and acquires Dutch real estate on behalf of the trust or enters into a business relationship in the Netherlands on behalf of the trust – for example, with:
- a financial institution;
- an accountant;
- a lawyer;
- a civil law notary; or
- a tax adviser.
The UBOs of a trust are the settlor(s), trustee(s), protector(s), beneficiaries or classes of beneficiaries and any other natural person ultimately exercising control over the trust. Access to the Trust Register, like the UBO Register, is currently limited due to the European Court of Justice ruling of 22 November 2022 (see above). The Dutch government will in principle apply the same considerations regarding the access to the Trust Register that apply to the UBO Register. Information to be submitted is comparable to that of the UBO Register.
On 1 November 2022, the Trust Register entered into force. Trusts and similar legal arrangements that were already created as of this date had five months to register the UBOs of trusts. Now that this transition period has ended, trustees must comply with the registration requirements within one week after creating the trust or similar legal arrangement. Changes of the UBO must also be registered within one week after occurrence.
Mandatory Disclosure
Based on the Mandatory Disclosure Directive, the Netherlands implemented rules obliging EU-linked intermediaries (such as lawyers, tax advisers and bankers) and, under certain circumstances (eg, if the intermediary involved is entitled to legal professional privilege), the taxpayers themselves to report certain arrangements to the Dutch tax authorities. These arrangements are potentially aggressive tax planning arrangements with a cross-border dimension and arrangements that are designed to circumvent reporting requirements such as CRS and UBO reporting.
Information needing to be reported includes:
- the taxpayer’s (and intermediary’s) identity;
- a summary of the content of the reportable cross-border arrangement; and
- details of the tax provisions on which the arrangement is based.
The tax authorities will automatically exchange the information within the EU through a centralised database.
2. Succession
2.1 Cultural Considerations in Succession Planning
This is not applicable in the Netherlands.
2.2 International Planning
The Netherlands has entered into various tax treaties in relation to personal and corporate income tax (see 1.1 Tax Regimes). These tax treaties may be affected by the MLI as of 1 January 2020.
The MLI is a multilateral tax treaty, pursuant to which new provisions and amendments resulting from the BEPS Project – aimed at preventing tax treaty abuses and (more generally) tackling international tax avoidance – can be incorporated into existing bilateral tax treaties. Among others, these provisions and amendments include anti-abuse measures, in short denying tax treaty benefits to cross-border structures that lack sufficient economic reality. These measures may affect international family-owned businesses’ eligibility for tax treaty benefits. High net worth individuals making investments through (deemed) passive holding companies may also be affected.
The MLI will not affect Dutch gift and inheritance tax treaties (see again 1.1 Tax Regimes).
2.3 Forced Heirship Laws
Children of the deceased have forced heirship rights (legitieme portie). They can be disinherited but may always make a monetary claim of 50% of the value of the share they would have received on intestacy. This claim needs to be made within five years of the deceased’s death; the forced heirship claim lapses after this five-year period, or earlier if an interested party has set a reasonable term during which the claim must be made.
The children’s forced heirship rights only apply with respect to the estate of their deceased parent. Therefore, for example, if the deceased was married and the community of property regime applied, the children are in equal shares entitled to a quarter of the total property of the deceased and the deceased’s spouse, since their deceased parent’s estate comprised only half of the total property.
A child who claims their forced heirship rights does not become an heir but has a monetary claim against the deceased parent’s estate. This claim can be recovered from estate assets. If the estate is insufficient to recover the entire claim, the children can recover their claims from certain gifts that were made by the deceased, such as:
- gifts made within five years preceding the death of the deceased;
- gifts made to descendants; and/or
- gifts made with the intention of infringing upon forced heirship rights.
The children may recover their claim from trust assets if the trust settlement is considered a donation by the deceased. Children can collect their forced heirship rights six months after their parent’s death. However, the parent’s will may contain a provision that the children can only collect their forced heirship rights after the death of their deceased parent’s spouse, registered partner or life partner with whom the parent entered into a notarial co-habitation agreement.
This provision can also apply if the deceased’s spouse, registered partner or life partner is not a parent of the children.
A disinherited spouse or registered partner also has some statutory rights:
- a claim of the usufruct of the family home and household effects; and
- a claim of the usufruct of other estate assets if the spouse or registered partner needs this for their maintenance (considering all circumstances).
In December 2020, a report was published by the Centre for Notarial Law of the Radboud University and Netwerk Notarissen about the forced heirship rights and the possible abolition of the forced heirship rights. The Dutch government responded mid-2022 stating that there is no urgent and widespread need or practical problem that requires proceeding in the short-term towards an abolition or modification of the forced heirship rights.
In April 2023, the Minister for Legal Protection responded (in a letter to the Dutch Parliament) to two reports published by the Scientific Research and Documentation Centre (Wetenschappelijk Onderzoek- en Documentatiecentrum) about child support and supervision of the administration of assets of minors. The Minister announced the preparation of a legislative proposal regarding, inter alia, a deferred start of the five-year period to claim the forced heirship until a descendant has reached the age of 18. The proposal is expected to be put up for consultation in early 2024.
2.4 Marital Property
Before 1 January 2018, the default marital property regime in the Netherlands was full community of property. This community included all property acquired before or during the marriage, even if acquired by inheritance, legacy or gift, unless the testator or donor had stipulated that the property was private property.
For marriages entered into on or after 1 January 2018, the default community of property is limited to the assets acquired during the marriage and excludes all property individually acquired prior to the marriage, as well as all property acquired by inheritance, legacy or gift.
Certain assets that are very closely connected to a spouse (eg, compensation for disability) are excluded from the community of property regime (in both the old and new regimes).
End of a Marriage
If the marriage ends by the death of a spouse or by divorce, the community of property is automatically dissolved. All assets must be divided equally between the surviving spouse and the heirs of the deceased spouse in the case of death, or between the ex-spouses in the case of divorce. Entering into a community of property, either by marriage or by amending marriage conditions (see below) during the marriage, is not regarded as a gift that must be taken into account when determining the children’s forced heirship rights.
Prenuptial and Postnuptial Agreements
The spouses can agree that the default regime does not apply (prenuptial or postnuptial agreement, or huwelijksvoorwaarden). A prenuptial or postnuptial agreement must be incorporated in a deed and executed before a Dutch civil law notary, and may be amended during the marriage.
The spouses can freely negotiate a prenuptial or postnuptial agreement and can, among other things:
- exclude or include any or all of the property from the default community of property regime;
- include a periodical settlement clause regarding saved income after the household expenses have been paid; and/or
- agree on a final settlement clause, according to which, at the end of the marriage by divorce and/or death, the value of property is settled as if the spouses were subject to a community of property.
2.5 Transfer of Property
In principle, the transfer of assets in Box 1 or Box 2 is a taxable event for Dutch personal income tax purposes (see 1.1 Tax Regimes). The transferor will be taxed on a (deemed) capital gain – ie, the difference between the cost price for tax purposes of the transferred asset and the consideration (or at least the fair market value) received.
For the transferee, the cost price for tax purposes of the acquired asset will be equal to the consideration (or at least the fair market value). Hence, the transferee will only be taxed on future (deemed) capital gains.
The Dutch Personal Income Tax Act 2001 provides for several exemptions to this method of taxation. For example, subject to strict terms and conditions, the levy of personal income tax may, upon request, be deferred in the case of a business reorganisation (Box 1 or Box 2), a transfer of business assets or a substantial shareholding that represents business assets (see 4.2 Succession Planning). If such deferral is granted, the transferor’s cost price for tax purposes is passed on to the transferee. A future (deemed) capital gain will then also include the gain for which deferral was granted.
2.6 Transfer of Assets: Vehicle and Planning Mechanisms
In addition to the general inheritance and gift tax allowances mentioned in 1.2 Exemptions, a few specific exemptions exist to make the transfer of assets to younger generations more feasible.
For Dutch gift tax purposes, a child of the donor gets a one-time increase of their annual exemption to EUR28,947 (2023) if they are aged between 18 and 40 at the time of the gift. Alternatively, a child of the donor may also receive a one-time increase to EUR60,298 if the gift relates to expensive study. In addition, a non-child can opt for a one-time increase to EUR28,947 (2023) if the gift relates to the acquisition or renovation of a principal residence (eigen woning) or is used to repay a debt related to the principal residence. However, this type of one-time increase will be abolished as of 1 January 2024. Opting for one of the above one-time increases rules out the possibility of opting for the other later.
The Personal Income Tax Act 2001 and the Inheritance Tax Act 1956 provide for the transfer of business assets and substantial shareholdings that represent business assets by the business succession facilities (bedrijfsopvolgingsfaciliteit or BOR). These facilities are discussed further in 4.2 Succession Planning.
Dutch tax legislation also provides for tax allowances for qualifying country estates. The transfer and possession of (shareholdings in) such estates is – in whole or in part – exempt from Dutch personal income tax, gift and inheritance tax, and real estate transfer tax. Country estate holding companies are also exempt from corporate income tax. The application of this exemption is subject to strict terms and conditions.
2.7 Transfer of Assets: Digital Assets
Dutch law does not provide specific rules regarding the succession of digital assets. Cryptocurrency is considered to be an asset that can be transferred from one person to another and can be left to a beneficiary in a will. Dutch law does not provide a solution regarding the practical issues that the transfer of digital assets may have, such as unknown passwords.
According to the Dutch tax authorities, for Dutch personal income tax purposes, income from cryptocurrency may be taxed in Box 1 if the generated income is regarded as income from business activities or other activities that are taxed in Box 1. If the income is not taxed in Box 1, a deemed return over the fair market value of the cryptocurrency will be taxed in Box 3.
If cryptocurrency is transferred by way of inheritance or donation, inheritance tax or gift tax will be levied if the holder of the cryptocurrency was (deemed) resident in the Netherlands either at the time of their death or at the time of the donation. The tax will be levied over the value of the cryptocurrency at that moment and is payable by the beneficiary. See 1.1 Tax Regimes.
3. Trusts, Foundations and Similar Entities
3.1 Types of Trusts, Foundations or Similar Entities
In the Netherlands, a foundation is often used for tax and estate planning purposes. A foundation under Dutch law is a legal entity, meaning that the liability of persons involved with it (eg, board members) is limited.
A foundation is incorporated through the execution of a notarial deed before a Dutch civil law notary, containing the foundation’s articles of association.
The main characteristics of a Dutch foundation are that:
- it does not have members or shareholders;
- the aim is to realise the objectives (which cannot contravene the law) as described in the articles of association for which the foundation uses its capital; and
- it only has one mandatory corporate body, its board, but can have other bodies such as a supervisory and/or advisory board.
Dutch Foundations as Fiduciaries
Dutch foundations are often used as fiduciary foundations (STAK). When used as such, assets (eg, shares in a company, an art collection or investments) are transferred to the foundation to be held in administration, against the issuance of depository receipts (certificaten) by the foundation. This creates a separation between the legal title to (juridische gerechtigdheid) and the beneficial ownership of (economische gerechtigdheid) the assets.
The relationship between the STAK and the depository receipt holders is governed by the trust conditions (administratievoorwaarden), which are often established by the board of the foundation and imposed on anyone acquiring depositary receipts.
Trust foundations and charitable foundations are often used in wealth and charitable planning.
3.2 Recognition of Trusts
The Netherlands does not have trust law. However, as the Netherlands adheres to the Hague Trust Convention, it does recognise foreign trusts if they are created according to the rules thereof.
In principle, trust assets are not affected by succession law (including forced heirship rules). However, it cannot be ruled out that the settlement of assets into a trust could be regarded as a gift that harms forced heirship claims. This could result in a claim by a forced heir vis-à-vis the trustee.
Under the Hague Trust Convention, a trust may not need to be recognised if it harms forced heirship entitlements.
3.3 Tax Considerations: Fiduciary or Beneficiary Designation
Trust Foundation
For Dutch personal income tax and gift and inheritance tax purposes, a Dutch trust foundation (or other trust/trust-like entity) is generally qualified as an SPE, to which the SPE regime applies (see 1.1 Tax Regimes). Under this regime, the transfer of assets and liabilities for personal income tax purposes is ignored, and the assets and liabilities remain allocable to the donor. As a result, the foundation (the trustee) is not taxed separately.
The SPE regime does not extend to Dutch corporate income tax: for the purpose of this tax, the assets and liabilities of a trust foundation are not allocated to the donor. It should therefore be verified whether the trust foundation is subject to corporate income tax. This would only be the case in so far as a trust foundation carries on a business enterprise or owns Dutch real estate.
If the trust foundation’s assets and liabilities consist of portfolio investments or mere shareholdings, it would generally not be subject to corporate income tax.
Fiduciary Foundation
A Dutch fiduciary foundation or STAK (see 3.1 Types of Trusts, Foundations or Similar Entities) is considered to be the legal owner of the assets and liabilities transferred to it. Beneficial ownership lies with the depositary receipt holders. Therefore, a STAK has a liability to its depositary receipt holders equal to the value of the assets and liabilities it holds in administration and has no equity or taxable income of its own. As such, a STAK is not taxed separately.
If structured properly (through articles of association and trust conditions), a STAK is considered fully transparent for tax purposes. Its depositary receipts are then fully assimilated to the underlying assets. However, if under the trust conditions it is no longer possible to identify the underlying assets with the depositary receipts, a deemed transfer of assets may be recognised for Dutch tax purposes.
Because of its characteristics – ie, not being taxed separately, flexible articles of association (see 4.1 Asset Protection) and the assimilation of its assets and liabilities to the depositary receipts – a STAK is often used in wealth/holding structures for family governance purposes.
3.4 Exercising Control Over Irrevocable Planning Vehicles
A Dutch foundation can be used as a civil law trust. This means that an individual donates assets to the foundation and imposes an obligation on the foundation to distribute the assets and the income arising therefrom to certain beneficiaries. The foundation becomes the legal owner of the assets, although it only holds them temporarily.
The foundation can be given discretionary powers to decide when and how it makes distributions to its beneficiaries. The individual can retain some control by being a board member of the foundation or by having the power to remove and appoint board members. The donation to the foundation can also be revocable.
4. Family Business Planning
4.1 Asset Protection
In the Netherlands, a STAK (see 3.1 Types of Trusts, Foundations or Similar Entities) is often used in estate planning – eg, as a method to safeguard continuity within a company. By transferring the shares in the family business (the top holding company) to a STAK against the issuance of depositary receipts, beneficial ownership is effectively separated from legal ownership. This allows for a transfer to the next generation (eg, by donating the depositary receipts) while remaining in control of the family business through the board of the STAK.
Dividends and future capital gains derived from the shares will accrue to the depositary receipts holders without any inheritance or gift tax being due.
The shareholder can strengthen the continuity of the family business by making specific arrangements regarding the constitution of the board of the STAK once the shareholder has resigned as board member. Because Dutch law contains very few requirements in this respect, the contents of the articles of association of a STAK can be tailored to a great extent (especially regarding the organisation and voting powers).
4.2 Succession Planning
Business Succession
The Inheritance Tax Act 1956 and the Personal Income Tax Act 2001 provide for a tax facility for the transfer of business assets and substantial shareholdings that represent business assets as part of a business succession: the business succession facilities (bedrijfsopvolgingsfaciliteit or BOR). Subject to strict terms and conditions, the following inheritance tax and gift tax characteristics apply to the transfer of such assets and shareholdings.
- Assets and shareholdings are valued as a going concern. If the liquidation value of a business exceeds the going concern value, the difference can be conditionally tax-exempt.
- EUR1,205,871 (2023) of the going concern value and 83% in excess of EUR1,205,871 of the going concern value can be conditionally tax-exempt.
- For the tax on the remaining 17% of the going concern value in excess of EUR1,205,871, a conditional extension for payment for a period of ten years can be obtained.
One of the conditions is that the business must be continued for a period of five years after the gift or the death of the deceased.
In addition, the levy of Dutch personal income tax may be (partly) deferred if certain requirements are met. Deferral is only possible for the transfer of business assets (Box 1) and substantial shareholdings that represent business assets (Box 2). For both boxes, the main requirement is that the successor has been working with the enterprise for at least 36 months prior to the transfer. For business assets and substantial shareholdings that represent business assets acquired from an estate at death, the “36-month requirement” does not apply.
There is often discussion on whether business succession facilities can be applied to real estate portfolios (including substantial shareholdings in real estate companies). In most cases, the Dutch tax authorities take the position that real estate portfolios are to be considered passive investment assets (instead of business assets) to which business succession facilities cannot be applied. Recent case law indicates that, under certain circumstances, this point of view may be too strict; if certain requirements are met, real estate portfolios could qualify as business assets. Those qualifying assets should therefore be eligible for business succession facilities. Nevertheless, the Dutch government plans to introduce a law as of 1 January 2024 under which real estate portfolios will be deemed as qualifying as passive investment assets to which the business facilities cannot be applied.
The Dutch government has also announced a further revision of the business succession facilities as of 1 January 2025, making them less attractive. Among other significant measures, it is proposed to reduce the conditional tax exemption from 83% to 70% to the extent that the going concern value exceeds EUR1.5 million.
4.3 Transfer of Partial Interest
For Dutch income tax and gift and inheritance tax purposes, a partial interest in an entity is taken into account for at least its fair market value at the time of transfer.
The fair market value of listed securities is based on the closing price as shown in the Official List of a certain exchange on the day prior to the transfer. For other (partial) interests, the fair market value has to be determined on a case-by-case basis. A taxpayer may take into account a discount for lack of marketability and control, for example, if the shareholding represents a minority interest or is subject to a right of first refusal (aanbiedingsregeling). A blocking clause (blokkeringsregeling) contained in the articles of incorporation is generally not considered to be of relevance.
It should be emphasised that case law on this point is highly casuistic. Whether a discount may be taken into account therefore strongly depends on the facts and circumstances of each case and is likely to be a topic of discussion with the Dutch tax authorities.
5. Wealth Disputes
5.1 Trends Driving Disputes
In general, the number of disputes concerning Dutch inheritance law is limited, although growing. This is mainly because the inheritance law is relatively modern (the current legislation was introduced in 2003) and a deceased has to dispose of their estate by notarial deed. To execute such a deed, a Dutch civil law notary, among others, has to verify a person’s capacity and whether that person’s wishes are correctly incorporated in their will.
A growing number of disputes relate to the use (or abuse) of a durable power of attorney (see 8.1 Special Planning Mechanisms).
Regarding Dutch tax law, wealth disputes, among others, concern the Dutch personal income tax on a deemed annual yield in Box 3 (see 1.1 Tax Regimes). Box 3 taxation has been subject to much (social) debate. For 2017 and 2018, the Supreme Court ruled that the Box 3 income tax system is in violation of the ECHR.
There are also tax disputes regarding the applicability of the Dutch business succession facilities, mainly in relation to real estate. Reference is made to this in 4.2 Succession Planning.
5.2 Mechanism for Compensation
This is not applicable in the Netherlands.
6. Roles and Responsibilities of Fiduciaries
6.1 Prevalence of Corporate Fiduciaries
This is not applicable in the Netherlands.
6.2 Fiduciary Liabilities
This is not applicable in the Netherlands.
6.3 Fiduciary Regulation
This is not applicable in the Netherlands.
6.4 Fiduciary Investment
This is not applicable in the Netherlands.
7. Citizenship and Residency
7.1 Requirements for Domicile, Residency and Citizenship
Foreign nationals who wish to reside in the Netherlands for more than three months need a residence permit. An application must be filed with the Immigration and Naturalisation Service (IND). Most foreign nationals need to apply for a regular provisional residence permit (MVV) before entering the Netherlands.
For a stay of less than three months, no residence permit or MVV is required; a visa will suffice. Specific rules apply for EU (except for Romanian and Bulgarian) nationals, European Entrepreneurial Region (EER) nationals and Swiss nationals, who do not require a permit.
Employers are required to obtain a work permit before hiring a non-EU employee. In most cases, this work permit will only be granted if it is established that the employer was unable to find suitable personnel in the Netherlands or elsewhere in the EU. An exemption applies to highly skilled migrants (eg, a migrant who has completed a master’s or post-doctoral programme or obtained a PhD at a designated educational institution abroad), and certain scientific researchers. Certain professions may only be practised in the Netherlands if the employee has the correct certificate.
If a foreign national stays in the Netherlands for a period of more than four months, they are obliged to register with the Dutch Municipal Personal Records Database (Basisregistratie Personen or BRP). In order to obtain (or regain) Dutch citizenship, an individual who has reached majority has, in general, two alternative routes to follow: the “option procedure” or “naturalisation”.
The option procedure is only available to certain foreign nationals but is the fastest and easiest way to become a Dutch citizen, taking approximately three months to complete. For an example, an individual may qualify for this procedure after living in the Netherlands for a certain period of time or if they are a former Dutch citizen.
The process of naturalisation may take up to one year. Official documents – such as a passport or residence permit, marriage certificate and a child’s birth certificate – need to be submitted, along with a civic integration certificate.
7.2 Expeditious Citizenship
There are no expeditious means for an individual to obtain Dutch citizenship.
8. Planning for Minors, Adults With Disabilities and Elders
8.1 Special Planning Mechanisms
Anyone under the age of 18 in the Netherlands is considered a minor. A minor can own assets, which are managed by their parents or guardian. A testator or donor can also appoint someone other than the minor’s parents/guardian as administrator of the assets.
The legislative proposal as discussed in 2.3 Forced Heirship Laws will also contain the replacement of the parental right of enjoyment with a determination by the sub-district court to what extent a parent may use (income from) assets of the child.
In the case of loss of capacity, a person can be put under legal restraint by a sub-district court. In this case, a legal guardian is appointed to represent the incapacitated person. A sub-district court can also impose a fiduciary administrator if an adult cannot administer their own property.
To plan for loss of capacity, a “living will” can be made. A living will usually provides for certain powers of attorney and may also provide for certain medical provisions (such as a “do not resuscitate order”).
A durable power of attorney, granted before the loss of capacity, remains valid. Foreign powers of attorney are also generally recognised. For certain legal acts, such as mortgaging immovable property in the Netherlands, a notarial power of attorney is required.
8.2 Appointment of a Guardian
In the case of loss of capacity, a person can be put under legal restraint by a sub-district court. A sub-district court order is also required if an adult is to be put under fiduciary administration.
The parents or guardian of a minor (a child under 18) need a sub-district court’s authorisation for certain legal acts that significantly affect the minor’s property, such as donations on behalf of the minor or the disposition of assets other than money.
8.3 Elder Law
In the case of loss of capacity, a person can be put under legal restraint. A legal guardian is appointed to represent the incapacitated person. To plan for loss of capacity, a person can also make a living will.
If an adult cannot administer their own property, a fiduciary administrator can be imposed to administer that adult’s property.
A durable power of attorney, given before the loss of capacity, remains valid. Although foreign powers of attorney are generally recognised, a notarial power of attorney is required for certain legal acts, such as mortgaging immovable property in the Netherlands. See 8.1 Special Planning Mechanisms and 8.2 Appointment of a Guardian.
9. Planning for Non-traditional Families
9.1 Children
The laws in the Netherlands stipulate that the determining factor for a child’s legal position is whether “legal family ties” exist between the child and the deceased.
Legal family ties between the child and their mother arise through birth or adoption. Legal family ties between the child and their father arise through:
- birth within wedlock (or during a registered civil partnership);
- formal recognition of the child by the father;
- judicial establishment of paternity; or
- adoption.
If a child has legal family ties with a parent, regardless of how they arose, the child is an intestate heir and is entitled to a statutory share (see 2.3 Forced Heirship Laws).
Biological children who have no legal family ties and stepchildren are not intestate heirs and are not entitled to a statutory share. They can, however, be appointed as beneficiaries in a will and under circumstances where the gift or inheritance tax rate applicable to children may apply.
Modernising Dutch Law
In 2016, the Government Committee Rethinking Parenthood published its recommendations for modernising Dutch law with respect to (among others) multi-parenthood and surrogate motherhood. The Committee recommended providing legislation:
- allowing a child to have more than two legal parents (ie, “multi-parenthood”); and
- specifically aimed at surrogate motherhood.
In 2019, the Dutch government published its appraisal of these recommendations. The government decided it will not pursue multi-parenthood (instead, it proposes shared custody for those involved), but will follow through on legislation for surrogate motherhood. The first legislative proposal has already been made.
A new law regarding the possibility of a double surname will enter into force on 1 January 2024. As of that date, a first-born child can bear both parents’ names in an order to be determined freely. Children born afterwards will have to be called the same. Transitional law for children born after 1 January 2016 applies.
9.2 Same-Sex Marriage
In the Netherlands, same-sex couples can marry or enter into a registered civil partnership. They are treated equally to heterosexual couples in relation to property, gifts and inheritances, and tax law.
10. Charitable Planning
10.1 Charitable Giving
Gifts and inheritances made by a Dutch resident to a designated charitable organisation (algemeen nut beogende instelling or ANBI) are exempt from gift and inheritance tax. A charity (usually a foundation or stichting) may qualify as an ANBI if it meets certain strict requirements, the most important being that at least 90% of the actual activities support the public interest.
In addition, gifts and certain “periodical gifts” to ANBIs are also deductible for personal income tax purposes. A deduction for personal income tax purposes is only allowed in so far as the gift exceeds 1% but does not exceed 10% of the donor’s total income. For gifts to cultural ANBIs, a multiplier of 25% (with a maximum increase of EUR1,250) applies. As of 1 January 2023, the deductibility of periodical gifts to ANBIs is limited to EUR250,000 per calendar year. To qualify as a periodical gift, the gift should consist of at least five fixed (regarding the amount) and regular (regarding instalments, which should be payable in – at least – five calendar years) donations, and can be made by notarial deed or private instrument.
For resident companies, gifts to ANBIs are deductible for corporate income tax purposes. Gifts – including gifts made in connection with the charitable wishes of the shareholder – are deductible, up to a maximum of 50% of a company’s profit, as long as this is not more than EUR100,000.
A gift received from an ANBI is exempt from gift tax, provided the gift is made according to the charitable purpose of the ANBI. ANBIs do not qualify as SPEs for Dutch personal income tax purposes (see 1.1 Tax Regimes) and are generally not subject to Dutch corporate income tax.
ANBIs do need to comply with certain public disclosure requirements. Among other information, ANBIs need to make available to the public the composition of the board, a current report of past and contemplated activities, and a financial report. ANBIs are also subject to CRS obligations and must be registered in the UBO Register (see 1.6 Transparency and Increased Global Reporting).
10.2 Common Charitable Structures
In the Netherlands, the most commonly used charitable organisation is an ANBI (see 10.1 Charitable Giving). It should be noted, however, that one of the requirements for charitable organisations to qualify as an ANBI is that assets are actually spent according to the charitable objective. Where a charitable organisation also has (long-term) investments, the Dutch tax authorities may take the position that the charitable organisation does not comply with this “spending requirement”.
In this context, a committee (set up by the previous administration) concluded that new legislation should be implemented that requires ANBIs to carry out a certain minimum number of activities or spend a minimum amount of money on the public interest. More guidance in this respect is expected to be provided shortly.
Loyens & Loeff
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Trends and Developments
Authors
Mazars is an internationally integrated partnership, specialising in audit, accountancy, tax and advisory. It operates in more than 90 countries and can draw on the expertise of more than 44,000 professionals – 28,000 in Mazars’ integrated partnership and 16,000+ via the Mazars North America Alliance – to assist clients of all sizes at every stage in their development. The firm’s specialised private client team adopts a “top-down approach”, focusing on taking care of clients and their families. It aims to deliver custom-made advice on clients’ personal, family, marital and estate affairs, ensuring that personal and business interests are structured efficiently and line up with clients’ wishes and preferences. A such, the firm has a great deal of experience in interactions between countries around the world. The team in the Netherlands consists of nearly 30 tax and/or civil lawyers.
Introduction
Among the key recent developments in the private wealth sector in the Netherlands are the significant investments made by the Dutch government during the COVID-19 pandemic, to compensate for the economic impact of the war in Ukraine and the energy and nitrogen crisis. The State is especially looking at entrepreneurs and wealthy individuals to provide these additional funds. It should be noted that some of the developments discussed in this article are still subject to ongoing political debate, making it hard to make accurate predictions or draw decisive conclusions. In addition, the Dutch government collapsed in 2023. Now that the cabinet has fallen, new elections will be held in November 2023, giving Dutch citizens the opportunity to elect new members of the House of Representatives. These elections will determine which parties can form a new coalition government and lead the country. That said, from the general societal and political sentiment it seems clear that the tax burden for a great number of entrepreneurs and wealthy individuals is expected to increase soon.
Income Tax
Dutch residents pay income tax on their worldwide income. The income tax system is divided into three separate boxes for different categories of income (2022 rates):
- box 1 – income from work and home ownership is taxed at progressive rates up to 49.5%;
- box 2 – income from a substantial shareholding is currently taxed (in principle when an individual holds at least 5% of the shares in a company), at a flat rate of 26.9%; and
- box 3 – income from savings and investments (eg, bank savings, bonds, shares or other investments) is also taxed.
In the past few years, there has been a trend whereby many individuals contributed their savings and investments to a legal entity in order to shift the taxation of these assets from box 3 to box 2, because box 2 has a number of tax advantages over box 3 (and box 1). In recent years, the political environment and wider society have seemed increasingly unhappy with the benefits of box 2, especially because these benefits appear to have largely accrued to wealthy individuals. Thus, a rebalancing of box 2 and box 3 is on the political agenda.
One of the first measures to become effective (as per 31 December 2023) is that a substantial shareholder (holding at least 5% of (a class of) shares) will be subject to tax in box 2 for the debts to the company insofar as they exceed EUR700,000. The excess of this threshold will be regarded as a deemed dividend.
There are various other legislative proposals to amend various aspects of box 2, most of which include an increase of the box 2 tax rate. These proposals are too numerous to address in this article, and the majority are complex, still uncertain and subject to political scrutiny. Relevant for this article is that the rate will be lowered to 24.5% for income up to EUR 67,000 but raised to 31% for income above that amount.
The taxable income from savings and investments was determined based on a deemed return on the value of the assets, rather than on actual income from these assets. The deemed yield depended on the amount of savings and investments held by an individual as per 1 January of the relevant tax year. The higher the amount, the higher the yield an individual was deemed to receive. This led to an effective tax rate of 0.56–1.71% on the total value of assets per 1 January of each year. Because the income derived from the assets is determined based on the value of the assets, the box 3 system is more similar to an actual wealth/property tax than to an income tax.
In December 2021, the Supreme Court ruled that the (former) box 3 regime is incompatible with EU law as from 2017, and the Supreme Court offers legal redress by, in short, only allowing tax on the actual return. Therefore, the Ministry of Finance/tax authorities will need to compensate certain taxpayers going back to 2017. The Dutch Ministry of Finance started working on a new box 3 regime, but indicated that it is unlikely that a new box 3 system based on actual income will be feasible before 2027. In the meantime, notional rates are used that – according to the government – should be close to the actual income. These are the rates for 2023:
- bank deposits, savings and cash – 0.36%
- investments/other assets – 6.17%
- debts – 2.57%
The rate for investments and other assets is fixed. The rates for bank and savings deposits and debts are still provisional. The tax authorities will determine these percentages in early 2024.
As mentioned in the introduction, the government recently collapsed and it is therefore even more uncertain within what timeframe legislative proposals in this regard will be made.
Gift and Inheritance Tax
Whether a gift or inheritance is taxable in the Netherlands depends on the place of residence of the donor/deceased. Dutch gift tax and inheritance tax are levied on the value of everything that is acquired by virtue of gift or inheritance from someone who was a resident of the Netherlands at the time of the gift or the death. The recipient is the taxpayer.
For the purposes of Dutch tax law, where someone lives is based on all facts and circumstances, and certain persons are deemed to live in the Netherlands for gift and inheritance tax purposes, as follows:
- a Netherlands national who has been residing in the Netherlands and has died or made a gift within ten years of leaving the Netherlands; and
- anyone who has resided in the Netherlands and has made a gift within one year of leaving the Netherlands
In the Netherlands, the gift and inheritance tax rates are doubly progressive. The progression depends firstly on the relationship between the donor/deceased and the donee/beneficiary, and secondly on the value of the gift (per year) or inheritance received. The tax rates (2023) for gift and inheritance taxes for partners and children are 10% for an acquisition up to EUR138,641 and 20% for anything above that threshold. For (great)grandchildren, a rate of 18% applies to an acquisition up to EUR138,641, and 36% for anything above. For all other donees/beneficiaries, a rate of 30% applies for an acquisition up to EUR138.641 and 40% for anything above.
Certain exemptions may be applicable, depending on the relationship between the donor/deceased and the donee/beneficiary and the object of the gift/inheritance.
Business Succession Facility
Business succession facilities are very high on the political agenda. The Dutch business succession facility contains two different elements.
For income tax, a relief from direct capital gains tax is available in box 1 or box 2. The recipient then takes over the cost price of the former entrepreneur/shareholder, making it, in essence, a tax deferral. One of the conditions in this regard is that the recipient of a gift of shares must have been working for the business for at least three years, although this condition does not apply if the shares are acquired upon death. The “employee-condition” may be cancelled, making the deferral also available to non-employees.
Upon request and if certain conditions are met, business assets up to EUR1,205,871 are fully exempt from gift and inheritance tax, and the effective tax rate for business assets exceeding EUR1,205,871 is lowered to 3.4% instead of 20% (parents/children). A conditional deferral of payment can be obtained for the remaining taxes.
There are two important conditions for the gift and inheritance tax exemption:
- The former entrepreneur/shareholder must have carried on the business for at least five years preceding the gift, or for at least one year in the case of an inheritance.
- The business must be continued for a period of five years – if the business is (partially) discontinued within five years, the facility is (partially) rejected and taxes will be collected. The conditional exemptions become unconditional after five years, provided the business was not discontinued.
The Dutch rules on gifts/succession of business assets have been the source of ongoing political debate. Opponents argue that the basis for lenient rules on business succession has no merit, proposing instead to merely allow for a temporary payment deferral. Proponents state that the continuity of (family) businesses is at stake when they are confronted with a high tax bill upon the transfer of the family business to the next generation. Owners of businesses tend to use the current facilities as much and as soon as possible, because in the current political climate the facilities are expected to become less favourable when they are altered (soon). The effective tax rate under the facilities will likely be 6% for a company valued at more than EUR1.5 million from 2025. Another measure that is taken in this regard is that real estate (rented out to third parties) will be excluded from the exemption facility entirely. Also, an age requirement of 21 years might be imposed.
Abolishment of Exemption for Principal Dwellings
There are several exemptions from Dutch gift tax, with the most important being as follows (rates 2023).
- Gifts that children receive from their parents can benefit from an annual exemption amounting to EUR6,035. A one-time increase of this exemption is allowed if the child has reached the age of 18 but is younger than 40 at the time of the gift. The increase is permitted up to an amount of EUR28,947, or up to EUR60,298 if the gift was made for an education with above-average costs.
- Gifts received by others than children can benefit from an annual exemption amounting to EUR2,418.
- The last year in which a one-time exemption of EUR27,231 can apply to gifts to a donee is 2023, if the gift is made to acquire, renovate or pay off a loan related to the purchase of a principal dwelling, and the recipient has reached the age of 18, but is younger than 40 at the time of the gift. This temporary exemption will be abolished from 1 January 2024.
Real Estate Transfer Tax
The real estate transfer tax rate currently amounts to 10.4%. A reduced rate of 2% applies for real estate that qualifies as the principal dwelling for the acquiring party.
Corporate Income Tax and Dividend Withholding Tax
The corporate income tax rate is 19% up to EUR200,000 profit, and 25.8% for profits above that amount.
One of the developments relevant to the private wealth sector is that certain partnerships that are currently subject to corporate income tax may become tax transparent in the near future.
The dividend withholding tax rate is 15%. Generally, intercompany dividends are exempt. However, there are several anti-abuse measures that need to be considered, including if the party entitled to the dividends holds the participation (in the Dutch company) with principal objective of avoiding withholding tax (subjective anti-abuse test) and there is an artificial construction (or transaction (or a series of constructions or a combination of transactions) (objective anti-abuse test) that may consist of several steps or parts, said construction or transaction (or series of constructions or combination of transactions) shall be regarded as artificial insofar as, respectively, it has not been set up for valid business reasons that reflect economic reality.
This measure was introduced to combat the interposing of foreign holding companies to hold Dutch companies. In general, as soon as there are relevant substance/business activities at the level of the holding, the regulation might not be applicable. It affects the private wealth sector as this rule could apply to any foreign company holding at least 5% in a Dutch company. Privately owned foreign holding companies in particular can have difficulties meeting the relevant substance criteria, which include that the holding must have payrolling costs equal to at least EUR100,000 that represent remuneration for the activities in the context of the participation in the Dutch company. The holding must also have an appropriate office at its disposal.
International Trends and Exchange of Information
The Netherlands continues to actively participate in international and EU tax discussions and strives to be a frontrunner with the adaptation of new (anti-abuse) legislation and tax treaties, including the OECD’s Multilateral Instrument (MLI), Pillar Two.
UBO register
The Netherlands implemented the EU (ultimate beneficial owner) UBO register. An individual is a UBO if they hold an interest of more than 25% in a Dutch legal entity. The information to be registered with the Chamber of Commerce includes:
- name;
- date of birth;
- place of birth;
- full address;
- the size of the interest (fixed categories of 25–50%,>50–75% and >75–100%); and
- the nationality of the UBO.
Certain UBO information will be publicly available, such as the name, month and year of birth, nationality and country of residence. Since 22 November 2022 information is no longer publicly available due to an important decision taken by the European Court of Justice.
To obtain access to the UBO register data, an individual or legal must demonstrate a legitimate interest. The Dutch government is presently involved in the process of defining the term “legitimate interest”; however, it has not been determined how and by whom the concept of legitimate interest will be assessed. Of particular significance in this determination is the provision of access to those actively involved in activities aimed at preventing and combating money laundering and terrorist financing.
UBO Trust Register
In addition to the UBO register for legal entities, a UBO register for trusts and similar legal arrangements was introduced (the “UBO Trust Register”). The Dutch fund for joint account (fonds voor gemene rekening) qualifies as a similar legal arrangement.
The UBO Trust Register applies to trustees that reside or are established in the Netherlands, acquire Dutch real estate or enter into a business relationship with a Dutch party on behalf of the trust. An exemption applies for trusts that qualify as investment funds that have at least 150 participants and are managed by a fund manager licensed under the Financial Markets Supervision Act, in which case the trustee may register the participants as a group.
The trustee is responsible for registering the relevant trust information in the UBO Trust Register. This includes information on the trust itself and on all the UBOs of the trust. An individual qualifies as a UBO of a trust if they are the settlor, trustee, protector, beneficiary or any other individual who can ultimately exercise control over the trust through direct or indirect ownership or other means.
The information that should be included for the trust itself and that will be made publicly available includes:
- the name of the trust;
- the type (legal status) of the trust;
- the date and place where the trust was established; and
- the goal for which the trust has been established.
A copy of the relevant trust documents/deed(s) should be included, but this will not be made available publicly.
The information that should be included for the UBOs and that will be made publicly available includes:
- the surname;
- the month and year of birth;
- the nationality;
- the country of residence; and
- the size of the beneficial interest (fixed categories of 0–25%, >25–50%, >50–75% and >75–100%).
If an individual is not a UBO based on economic benefit, this will also be included. Information that should be included for UBOs but that will not be made available to the public includes:
- the citizen service number;
- day of birth;
- place and country of birth;
- address;
- email address;
- a copy of the UBO’s ID; and
- copies of documents evidencing why a person qualifies as a UBO (and for what interest).
Since 22 November 2022 this information is no longer publicly available due to the decision taken by the European Court of Justice as discussed earlier.
DAC6
The adoption of the Mandatory Disclosure Directive (DAC6) has also had a large impact on the exchange of information. Based on DAC6, intermediaries or taxpayers are required to report certain arrangements that meet specific defined “hallmarks”, which are formulated in order to identify certain potentially aggressive tax planning arrangements with a cross-border dimension and arrangements designed to circumvent reporting requirements such as the Common Reporting Standard and Ultimate Beneficial Owner Reporting. DAC6 was implemented in the Netherlands on 1 January 2021. Intermediaries and/or taxpayers must report potentially aggressive cross-border tax arrangements that meet one or more of the hallmarks to the Dutch tax authorities within 30 days.
DAC7
The Netherlands is also in agreement with DAC7, which requires digital platforms to provide tax information on their users and obliges the exchange of this data between the tax authorities of EU member states.
DAC8
The EU has released its draft amendment regarding crypto-assets named DAC8. DAC8 includes rules relating to the exchange of information on cryptocurrencies. This directive should enable tax administrations to obtain the necessary information to enable the effective taxation of cryptocurrencies.
Mazars
Lange Vijverberg 16
2513 AC
The Hague
The Netherlands
+31 88 277 10 01
+31 88 277 10 50
den.haag@mazars.nl www.mazars.nl
Law and Practice
Authors
has a designated team dealing with family-owned businesses and private wealth. It offers tailored, personal advice for family offices and high net worth individuals, investment managers, private equity firms and multinational enterprises. The team advises on the tax and legal structuring of family-owned businesses; the management and supervision of family-owned businesses and wealth; the protection of wealth and privacy; and the tax and legal structuring of succession planning, as well as valuable assets. It also offers legal support for those who are emigrating and/or repatriating; advice on prenuptial agreements and last wills; expertise in establishing (family) foundations and charitable organisations; and assistance in planning pension provision. There is full collaboration between the firm’s tax advisers, civil law notaries and lawyers, enabling them to find pragmatic solutions to complex tax and legal issues. Clients can draw on specialist tax and legal knowledge in the firm’s home markets (Benelux and Switzerland) and across its global (business) network.
Trends and Developments
Authors
Mazars is an internationally integrated partnership, specialising in audit, accountancy, tax and advisory. It operates in more than 90 countries and can draw on the expertise of more than 44,000 professionals – 28,000 in Mazars’ integrated partnership and 16,000+ via the Mazars North America Alliance – to assist clients of all sizes at every stage in their development. The firm’s specialised private client team adopts a “top-down approach”, focusing on taking care of clients and their families. It aims to deliver custom-made advice on clients’ personal, family, marital and estate affairs, ensuring that personal and business interests are structured efficiently and line up with clients’ wishes and preferences. A such, the firm has a great deal of experience in interactions between countries around the world. The team in the Netherlands consists of nearly 30 tax and/or civil lawyers.
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