Real Estate Tax Services News
Keeping you informed
PwC Netherlands I December 2024
New approach of Dutch tax authorities’ on taxation of German Sondervermögen
In brief
In our NewsAlerts dated September 2023 and November 2024, we informed you about the new Dutch classification rules for Dutch partnerships (commanditaire vennootschap, CV) and foreign partnerships and the amended classification rules for Dutch mutual funds (fund for joint account, fonds voor gemene rekening, FGR).
In our NewsAlert dated November 2024, we informed you about the decree of 9 November 2024 (“Decree") which states that in cases where partnerships have characteristics of a fund for joint account as well, the classification as fund for joint account prevails and the fund could be either transparent or non-transparent from a Dutch tax perspective.
Recently, more clarity has been given in relation to the Dutch classification of single investor funds in the form of certain German Sondervermögen. The clarification is the opinion of the relevant knowledge group of the Dutch tax authorities (DTA) (Kennisgroep), which was published on 4 December.
In detail
General
In general, the various knowledge groups within the DTA regularly publish their views on various topics that have been discussed internally, often following a ruling request filed by (Dutch) taxpayers. Note that these are the views of and positions to be taken by the DTA and are no formal legislation and may be challenged by relevant taxpayers and overruled by tax courts.
On 4 December 2024, the DTA published its view in relation to the Dutch classification of certain German Sondervermögen with a single investor.
Background
Under current Dutch law (effective until 1 January 2025), a German Sondervermögen should not be subject to Dutch corporate income tax (Dutch CIT) as non-resident taxpayer. This has been ruled by the Dutch Supreme Court on 14 June 2024 in relation to a German Sondervermögen that invested in Dutch real estate directly.
The Dutch Supreme Court in short argued that a German Sondervermögen is not subject to Dutch CIT as it is the equivalent of the Dutch mutual fund (fonds voor gemene rekening) as mutual funds are not included in the list of entities that could qualify as non-resident taxpayer for Dutch CIT purposes. As from 1 January 2025, mutual funds have been included in the list of non-resident taxpayers, so as from that moment, German Sondervermögen become in principle subject to Dutch CIT on Dutch source income.
German Sondervermögen, but also Dutch mutual funds, with only one investor, are for Dutch tax purposes effectively ignored. Based on a judgement from a Dutch Court of Appeal[1], a fund with only one investor is not used as a fund for collective investment but rather for individual investment and as such not subject to Dutch taxation. According to the Court, such a fund for individual investment forms part of the assets of the investor who invests through such a fund. The tax consequences thereof are directly attributed and do directly affect that investor, such that effectively the fund is ignored for Dutch tax purposes.
Dutch qualification of a (single investor) Sondervermögen for CIT and WHT purposes as of 1 January 2025
In the publication of 4 December 2024, the DTA took the following position in relation to a German Sondervermögen:
- A German Sondervermögen with more than one investor qualifies as comparable to a Dutch fonds voor gemene rekening or mutual fund as of 1 January 2025 if the requirements for a fonds voor gemene rekening are met. In this regard, a fonds voor gemene rekening, subject to Dutch CIT, is defined as follows:
- The fund qualifies as an investment fund (AIF) or undertaking for collective investment in transferable securities (UCITS) within the meaning of article 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht);
- The activities of the fund consist of passive investments activities (so cannot be an active business for Dutch tax purposes); and
- The participations in the fund are freely transferable, whereby participations are not considered freely transferable if they can solely be transferred to the fund itself by way of redemption.
2. A German Sondervermögen with only one investor should be qualified as not comparable to any Dutch legal form according to the DTA. Under the new tax classification rules, applicable as of 1 January 2025, this means in the view of the DTA that the tax classification of the jurisdiction of residence is to be followed (symmetrical method). Considering that in Germany such single investor Sondervermögen are in principle subject to CIT (Körperschaftsteuer), these single investor Sondervermögen may according to the DTA are in principle subject to Dutch CIT as of 1 January 2025 as well.
Difference between Sondervermögen without and with “Transparenzoption”
The published position relates to a German Sondervermögen that has not opted for transparency (the so-called “Transparenzoption").
The DTA do mention the Transparenzoption for certain Sondervermögen, however do not discuss the consequences. It is mentioned that if using the Transparenzoption impacts the Dutch tax position of the Sondervermögen, the knowledge group will publish a new position in that respect. As such, it is currently uncertain whether the DTA is of the view that also a single investor Sondervermögen that applies the Transparenzoption, should become subject to Dutch CIT as per 2025 as well.
German Sondervermögen qualifying as beneficiary for WHT purposes
Furthermore, in another knowledge group opinion, also published on 4 December 2024, the DTA took the following positions in relation to the Dutch dividend withholding tax. Based on the publication the DTA are of the view that:
- A German Sondervermögen with more than one investor does qualify as beneficiary (opbrengstgerechtigde) for Dutch dividend withholding tax purposes as of 1 January 2025, if it fulfills the requirements of a Dutch taxable mutual fund (fonds voor gemene rekening) (see above).
- Furthermore, a German Sondervermögen with only one investor that has not applied the Transparenzoption does in the view of the DTA qualify as beneficiary (opbrengstgerechtigde) for Dutch dividend withholding tax (WHT) purposes as of 1 January 2025 as it is not comparable to a Dutch legal form and as such the German tax qualification should be followed. As a result of these Sondervermögen being subject to Körperschaftsteuer in Germany it should be qualified as the beneficiary of dividends for Dutch dividend WHT purposes rather than the underlying investor(s). As a result, distributions to such Sondervermögen should not be exempt per article 4a, paragraph 1 under b of the Dutch Dividend WHT Act or no refund under article 10, paragraph 2 of the Dutch dividend WHT Act should be available according to the DTA.
Our view
Especially, the view relating to single investor Sondervermögen that do not apply Transparenzoption in Germany is remarkable and contrary to the current position in which the Sondervermögen with one investor is considered tax transparent (or effectively ignored) and Dutch (withholding) tax may be levied from the investor (depending on the qualification of that investor).
As a result, as of 1 January 2025, the investor may not be subject to Dutch CIT anymore, as the tax liability shifts to the fund. As a result, Dutch CIT may be levied on capital gains on the deemed transfer of assets and liabilities to the Sondervermögen by the investor. No transitory legislation is in place, for example, a deferral of the CIT due or roll-over.
Furthermore, the position that single investor Sondervermögen (that did not opt for Transparenzoption in Germany) is opaque, seems in breach with EU law. Currently, but also as from 2025 a Dutch fund with one single investor is effectively ignored for Dutch tax purposes.
[1] Court of Appeal ‘s-Hertogenbosch, 12 October 2017, ECLI:NL:GHSHE:2017:4323
© 2017 - 2024 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
