The Netherlands (and EU regulation)

Changes to the rules on Dutch real estate investments by funds for joint account and investment institutions

By Bart Le Blanc on March 14, 2023 Posted in Regulation and compliance, The Netherlands

On 8 March 2023, the Dutch Ministry of Finance published the Act amending the regimes for the fund for joint account, exempt investment institution and fiscal investment institution (Wet aanpassing fonds voor gemene rekening, vrijgestelde beleggingsinstelling en fiscale beleggingsinstelling) for public consultation. The consultation document consults on proposed new rules concerning investment in real estate by Dutch funds for joint account and Dutch investment institutions. The outline of this legislative proposal was first announced on Budget Day 2022.

the Dutch funds for joint account (FGR) and the Dutch investment institution (FBI) regime.

The proposal consists of three key items:

The aim of the proposal is to arrange for the regular taxation of any profits realised by fiscal investment institutions (generally public limited liability companies, private limited liability companies and funds for joint account) investing directly in Dutch real estate as of 1 January 2025 (contrary to the current tax exemption that applies for these entities). The proposal should not affect fiscal investment institutions that indirectly invest in Dutch real estate, e.g. by holding securities in other real estate entities.
The government recognises that the proposed amendments may require current funds and investment institutions to restructure their real estate portfolios. Therefore, a temporary exemption for real estate transfer tax is provided for, which will apply from 1 January 2024 to 1 January 2025.
In addition, the government wants to make use of this opportunity to scale down the exempt investment institution regime. It aims to limit the regime to those investment institutions that are licensed and subjected to governmental supervision from the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) and the Dutch Central Bank (De Nederlandsche Bank). To that extent, the exempt investment institution regime will be aligned with the definition of alternative investment fund or institution for collective investments in transferable securities as referred to in the Act on the Financial Supervision (Wet op het financieel toezicht). As a result, the exempt investment institution regime will no longer apply to high-net-worth individuals and families, among others.

The Dutch Ministry of Finance invites any interested parties to provide feedback on this proposal. The intention is to submit the final proposal of law on Budget Day 2023 (i.e. 19 September 2023).