In recent years the purchase of property in the Netherlands has seen an uptick, especially in the beachside town of Cadzand, where 1,500 new apartments and houses are being be built between 2008 and 2020. This is the perfect opportunity to examine the (tax) consequences of buying real estate in the Netherlands and the opportunities it offers in respect of asset and inheritance planning. This article only covers purchasing as a private person.
Points of attention when purchasing Dutch real estate
When purchasing property in the Netherlands, one must distinguish between the purchase of a new or an old home.
Purchasing ‘new’ property
A ‘new’ home is one that was bought before or no later than two years after the time at which it was first occupied. When buying new property in this sense, then 21% VAT is payable thereupon in Holland, similar to the Belgian VAT on new property.
Purchasing ‘old’ property
Purchasing an ‘old’ property in the Netherlands means that 2% in transfer tax is payable. Dutch transfer tax is significantly lower than the sales fee in Belgium which stands at 10% in the Flemish region and 12.5% in the Brussels-Capital and Walloon Regions.<
Taxes on ownership of Dutch real estate
Belgian citizens who own property in Holland are taxed under ‘box 3’ in the Netherlands or are subjected to the investment yield tax, where the yield from your property is set at a fixed sum on your behalf, using three progressive brackets1 (prior to 2017 a fixed rate of 4% was used). The fixed yield is then taxed at a rate of 30%, and the investment yield tax ultimately payable will be between 0.86% and 1.62%, depending on the value under the Valuation of Immovable Property Act of the property².
Even if you are already being taxed on the income generated by your property in the Netherlands, you must still include the income from foreign property in your Belgian personal income tax return.³ You will not be taxed for that income from immoveable property again, but it is taken into consideration for determining the applicable progressive tax rate for other taxable income and for municipal taxes (this is known as exemption under the progression method).
Selling your Dutch property
Capital gains tax is not payable in the Netherlands when you sell your Dutch real estate.
Inheriting Dutch property or gifting it
If you are planning to give your Dutch property to your children then, as a Belgian resident, gift tax is not payable, as neither the Netherlands nor Belgium will charge gift tax on Dutch real estate. The Netherlands won’t levy it as you are not a Dutch resident, and Belgium won’t levy it because the property being given away is not on Belgian territory.
But one must not forget that transfer tax of 2% will be payable in the Netherlands as a result of the gift.If a Dutch property is inherited, then neither inheritance tax nor transfer tax will be payable in the Netherlands, although you will be charged inheritance tax in Belgium, as you are taxed on worldwide assets.
Buying immoveable property in the Netherlands, as well as the transfer of the property to future generations, can be an attractive proposition from a tax perspective as a Belgian. This is because:
- When you buy an ‘old’ property you pay 2% transfer tax (when buying a ‘new’ home, you will be charged 21% VAT)
- When gifting it you might pay 2% transfer tax, but no gift tax
This means that you can transfer your purchased property to the next generation at 4% transfer tax. But don’t celebrate just yet – there is still the investment yield tax in box 3 of the Dutch income tax. That tax can be spread by, for example, gifting your property to your children while retaining right of usufruct. The children will then pay what is due under box 3 the value of the bare ownership, while the parents pay on the basis of usufruct.
1 Up to 75,000 EUR: 2.871 %; from 75,001 EUR to 975,000 EUR: 4.6 %; over 975,001 EUR: 5.39 %
² This is the sales value of the property, and any related debts can be deducted.
³ In the Netherlands it suffices that any fixed yield as stated in box 3 is included.