1. Back to EU Member states Netherlands Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on property acquisitions 5.Issues during Ownership 6.Disposal of property 7.Non resident owners of property 8.Sundry issues

2. Back to EU Member states 1. Introduction - Netherlands There are several reasons for businesses to buy, build or rent real estate in the Netherlands. Below is an outline of the main reasons for both businesses and private individuals. Businesses The Netherlands provides a strategic location to serve the markets within Europe. The central geographical position of the Netherlands, combined with accessibility and an excellent infrastructure are some of the reasons why numerous European, American and Asian companies have established their facilities in the Netherlands. Since January 2007 the Dutch tax environment for international companies has become very attractive. The corporate tax rate has been lowered to 25.5%, which is well below the EU national average. Dividend tax has been reduced from 25% to 15%. Furthermore, a patent box with a 10% tax rate on income from innovations was introduced. Combined with other traditional features of the Dutch tax system (wide tax treaty network, participation exemption, 30% tax break for highly qualified foreign employees) the fiscal climate is one more reason to establish or expand European operations in the Netherlands.

3. Back to EU Member states 1. Introduction – Netherlands (cont’d…) Private individuals The Netherlands has a high standard of living, while maintaining an affordable life for its residents. The costs of living, housing, education and cultural activities are lower than in most Western-European countries. This makes it a very attractive place to live or to have a holiday home. In the Netherlands people (and businesses) have long seen the benefits of buying property. In general buying is cheaper than renting for private individuals. The flexible mortgage system and tax reimbursement make it very attractive for the people who plan to stay for at least a few years. However, the Netherlands is one of the most densely populated countries in the world. This leads to situations, particularly around the major cities, where property demand exceeds supply and therefore prices become inflated beyond the reach of many potential buyers.

4. Back to EU Member states 2. Contact Details Please contact one of our contact partners (tax) for more information. KroeseWevers Tax Consultants Enschede officeEmmen office Hans Eppink Marcel Kocks Tel: +31 (0)53 850 49 00Tel: +31 (0)591 65 78 00 Fax: +31 (0)53 850 49 01Fax: +31 (0)591 61 91 52 hans.eppink@kroeswevers.nlhans.eppink@kroeswevers.nlmarcel.kocks@kroesewevers.nl KroeseWevers Tax Consultants is a member of Nexia Netherlands www.kroesewevers.nl

5. Back to EU Member states 3. Form of property ownership The ownership of real estate is defined and regulated in the Dutch Civil Code (Burgerlijk Wetboek). The owner has the uninhibited use and enjoyment of the real estate. Ownership may however be subject to the following restrictions: Rights of other persons to the real estate Restrictions arising out of legislation in force. These restrictions aim at protecting rights of third parties including the government as representative for the general interest. Other important statute laws regarding real estate outside the Dutch Civil Code are in force, for instance, land registration (Kadasterwet). The jurisdiction in the Netherlands recognises several forms of property ownership in which exist: Full ownership Co-ownership Long lease Apartment Servitudes Superficies. There are also some secondary real rights like pledge, mortgage and use.

6. Back to EU Member states 4. Taxes and other costs on property acquisition Transfer tax Real estate transfer tax (RETT) is charged for private individuals and businesses on the acquisition of Dutch real estate at 6% on the higher of the fair market value and the purchase price of the property. Also the acquisition of shares in an entity owning Dutch property can under circumstances be qualified as a deemed acquisition of property and thus be subjected to transfer tax at 6% of the market value of the underlying property, although exemptions may apply. When the property is newly constructed there is no levy of transfer tax. VAT VAT is generally due at the standard rate of 19% on any supply of goods and services in the Netherlands and the import of goods into the Netherlands. VAT registration is compulsory for any VAT taxable person (i.e. an individual or entity which independently carries on a business activity) irrespective of their residence, making VAT taxable supplies in the Netherlands. However, for foreign suppliers certain exceptions may be applicable whereby the customer has to self-account for the VAT due. As a result, the foreign supplier does not have to register in the Netherlands.

7. Back to EU Member states 4. Taxes and other costs on property acquisition (contd…) The sale of real estate is VAT exempt, unless the property is newly constructed or less than two years old (19% VAT). However, if certain conditions are met, there is an option for businesses to let the supply become taxable. If the property is newly constructed (or less than two years old) the Transfer tax is replaced with the 19% VAT. Transaction costs Total transaction costs are between 10% and 13%, of the total dwelling price for existing property, including the transfer tax (6%) legal fees and registration fees and estate agent’s commission. This is moderate by international standards. The bulk of these costs are paid by the buyer.

8. Back to EU Member states 5. Issues during ownership Owner-occupied property If private individuals own a property that serves as a principal residence (at least six months a year), they should add an amount to their income in this respect. This amount is known as the notional rental value. It is a percentage of the market value of the owner-occupied property. This value is determined by the authorities of the Dutch municipality in which the property is situated. The notional rental value can be offset against interest and charges of (mortgage) loans, and against payments towards a ground lease or building and planting rights in relation to the owner-occupied property. The notional rental value only applies to the property that serves as the principal residence. For second homes – e.g., a holiday home – and other immovable property another system applies (see next). For businesses there is no such a tax on the use of property. Rental income For private persons the annual income tax on renting property is 30%. In reality it is not really an income tax, but a flat tax, with 30% levied on the assumed rental yield. The basis of this assumption is that a rental yield of 4% is made on the property. In effect, an annual tax of 1.2% is imposed on the average value (start and end of the year) of the property minus the mortgage (loan). So if your rental property yields more than 4%, the proportionate tax rate is lower.

9. Back to EU Member states 5. Issues during ownership (contd…) If the real estate forms part of the individual’s business enterprise or the real estate itself is very actively exploited, the individuals will be subject to income tax at progressive rates of up to 52%. For businesses rental income on property is taxed at the standard rate of corporate income tax (CIT). As of 1 January 2009, the standard rate of CIT in the Netherlands is 25.5%, with the first € 100,000 being taxed at 20%. CIT is payable by Dutch-resident entities as well as by non-resident entities. CIT is reportable to the tax authorities on an accounting year basis. For specially defined investment institutions CIT is charged at 0% provided certain strict conditions are met. Depreciation For businesses, depreciation on real estate has been restricted to the assessed value, the so called WOZ, which is determined by local municipality annually. Only if the real estate is used for the companies own business depreciation is restricted to 50% of the assessed value. VAT As a rule, rent is exempt from VAT. Parties may, however, opt for VAT-increased rent if 90% or more of the business activities of the tenant are subject to VAT. Property tax Property tax is charged annually by the local authorities in the Netherlands on ownership based on the market value of the property. The use of property is no longer taxed by local authorities since the year 2006. Typical rates of property tax are generally between 0.1% and 0.3% for the owner of a property.

10. Back to EU Member states 6. Disposal of property Capital gains In general no capital gains tax is levied on the profits realized on the sale of property owned by a private individual. For businesses capital gains are generally chargeable to CIT at the standard rate. However, taxation of capital gains realised on the disposal of certain fixed assets such as real estate can be deferred by forming a tax-free reinvestment reserve. Such a reserve generally requires the replacement within 3 years of the disposed asset by an asset with a similar economic function. The Dutch participation exemption, effectively exempts capital gains derived from a sale of shares in a qualifying subsidiary (having at least 5% of the shares). Inheritance tax Property acquired by inheritance or gift from an individual (living in the Netherlands) is subject to inheritance or gift tax. Several forms of wealth transfer such as gifts made by the testator within 180 days prior to death and the proceeds of a life insurance contract for which the testator paid the premiums are treated as an inheritance for tax purposes. Property acquired through inheritance or gift is valued at fair market value less liabilities (debts such as tax debts, funeral costs, and other expenses). The tax is generally paid by the recipient. For both gifts and inheritances, a large number of exemptions apply. The heirs are also required to pay transfer tax and it is calculated on the value or sales price of the acquired Dutch property at the current tax rate of 6 %. Transfer tax can be offset by gift tax on property.

11. Back to EU Member states 7. Non resident owners of property Non resident owners of property are still liable for Dutch income tax in case of owning property here. They will be regarded as non-resident taxpayers for Dutch tax purposes. If someone is considered as a non-resident taxpayer, income tax in the Netherlands has to be paid on the Dutch income. However, this income need not always be taxable in the Netherlands: it may be that the Netherlands is not allowed to tax certain income under a tax treaty that the Netherlands has concluded with the country of residence.

12. Back to EU Member states 8. Sundry issues System of registration The territory of the Netherlands is divided into land registry parcels. Each of these parcels is recorded separately with the name of the titleholders. Lease agreements, rental agreements and other facts that relate to personal rights with respect to a registered property cannot be entered in the register. Ownership of the property is only acquired by the purchaser after registration of a certified copy of the notarial deed of transfer. This also applies for the other forms of ownership and real rights mentioned in paragraph 3. Non registered rights regarding real estate cannot be invoked against a purchaser in good faith if these rights should be registered. Financing Dutch law does not contain specific rules for entering into a loan agreement for the financing of a real estate acquisition, it provides more for rules pertaining to the furnishing of securities. In real estate financing in the Netherlands, the mortgage is still the pre-eminent form of security and most financing is still in the form of mortgage- backed loans. For the creation of mortgage rights a notarial deed and registration is needed. It is a principle of Dutch law that all creditors have resource against all assets of their debtor. Mortgages give priority against specific assets.

13. Back to EU Member states