Foreign real estate funds eligible for Dutch FBI exemption

13/09/21

The Real Estate Tax Services News of September 2021, looks at a case ruled by the Dutch court of appeal in ‘s-Hertogenbosch (Court) of 3 September 2021. The Court has ruled in a case for a client represented by PwC that under current Dutch tax law (dating from 2007) a German real estate investment fund (a Publikumsfonds in the form of a Sondervermögen), is in principle entitled to the Dutch FBI regime.

The FBI regime is a facility within the Dutch corporate income tax (CIT) Act that can be applied by listed and non-listed (real estate) investment funds providing, amongst others, for a 0% CIT rate. In order to apply the FBI regime, certain conditions (including the portfolio investment test, the distribution test, the shareholder test and the legal form requirement) need to be met. The importance of this case lies in the Court’s confirmation that, contrary to the position taken by the Dutch tax authorities (DTA), the German fund complies with the current legal form requirement even though no (withholding) tax is effectively levied on the Dutch source real estate income at shareholder level. The Court decided differently under former Dutch tax law (which applies to years commencing prior to 1 August 2007).

Please find the full Real Estate Tax Services News of September 2021 here.