All questions

Foreign investment

Where entitlement to immovable property is concerned, the law makes no distinction between Dutch and foreign investors. There are no restrictions that apply to foreigners that do not apply to Dutch participants. Similarly, with regard to investment regulations and the tax aspects of real estate transactions, Dutch and foreign actors are in principle treated equally.

American, British and German parties are well represented in the Dutch real estate market. In recent years, the importance of investors from emerging countries has increased.

Structuring the investment

A real estate investment, either as a direct or indirect acquisition, can be structured in many different ways. Amendments to law and regulations regularly result in new structures or in variations on existing structures. Obviously, specific investors' legal, financial, organisational and tax planning are also taken into account when structuring the investment.

i Companies

The private company with limited liability (BV) and the limited liability company (NV) have legal personality, are incorporated by a notarial deed and have a share capital divided into shares held by one or more shareholders. The shareholders in a BV or NV are not personally liable for acts performed in the name of the company; nor are they liable for contributing to losses of the company in excess of the amount that must be paid up on their shares. Different voting, dividend or liquidation rights between shareholders can be created by the issue of preference shares or separate classes of shares. The BV's articles of association may limit or exclude certain shares from sharing in the profits. Certain shares may also be excluded from voting.

The main differences between BVs and NVs are as follows:

  1. the shares in an NV are in bearer or registered form; the shares in a BV are in registered form only;
  2. the minimum authorised, issued and paid-up capital of an NV is €45,000; a BV has no minimum capital; and
  3. Dutch law offers a lot of flexibility to arrange for a fully tailor-made set of BV articles of association.

The BV and NV are subject to Dutch corporate income tax and distributions are, in principle, subject to Dutch dividend withholding tax.

ii Limited partnership (CV)

A CV is an entity without legal personality, entered into by an agreement between one or more general partners and one or more limited partners as investors. The general partners act on behalf of the CV, hold legal title to the real estate assets and are severally liable for the CV's obligations. The limited partners are only liable for the amount of their capital contributions, pursuant to the partnership agreement. However, if a limited partner acts in the name of the CV or has a decisive influence on the performance of the general partner (or partners), the limited partner also becomes severally liable.

Because the CV has no legal personality, its assets are usually owned by the general partners. However, the assets can also be owned by the general partner, or partners, and the limited partners together or by the limited partners jointly. The partnership agreement can provide that a partner may transfer its interest in the CV to a third party, subject to such approvals, consents and other requirements as the partnership agreement sets forth. The partnership agreement can be a private instrument and does not have to be in a notarial form. Another benefit of the CV is that it does not have any minimum capital requirements. A limited partnership is a popular investment vehicle, because it can be established as transparent for Dutch tax purposes. In that case, the CV itself is not subject to corporate income tax and dividend withholding tax in the Netherlands; for tax purposes, all assets and liabilities are attributed directly to the general and limited partners and will be taxed at this level. A non-transparent CV is subject to corporate income tax and dividend withholding tax (at fund level). In short, a CV will be considered transparent for Dutch tax purposes if the accession or replacement of a limited partner requires prior consent of all other limited partners.

iii Fund for joint account (FGR)

The FGR is often used as an investment vehicle. An FGR does not have legal personality; it is an agreement governing the relationship between the manager, the depositary and an individual investor. This agreement is often referred to as the terms and conditions, and deals with the management and custody of the fund. The terms and conditions often provide that an investor is not liable towards third parties and that its (internal) liability is limited to the amount that it has agreed to contribute.

Dutch civil law does not specifically provide for FGRs. This allows great flexibility in how the terms and conditions are drawn up, and this flexibility makes an FGR a suitable vehicle for real estate investment funds.

For Dutch tax purposes, an FGR can be established either as transparent or non-transparent. A transparent FGR is not subject to corporate income tax and dividend withholding tax; for tax purposes, all assets and liabilities are attributed directly to the investors and will be taxed at this level. A non-transparent FGR is subject to corporate income tax and dividend withholding tax (at fund level). In short, an FGR will be considered transparent for Dutch tax purposes if units in the FGR are transferable only with the consent of all investors or if units in the FGR are only transferable to the FGR by way of redemption of units (in which case no prior consent of all participants is required).

iv Cooperative (coop)

The coop is an association incorporated by a notarial deed. The coop must provide for certain tangible needs of its members, specified in its articles of association. The activities of the coop should have a certain relevance to the activities of the members themselves. This can be the case if a coop invests funds received from members that are themselves also active as investors. Distributions by a coop are in principle subject to Dutch dividend withholding tax. Subject to certain conditions, distributions made by a coop directly investing in real estate could be structured in a way so that they are not subject to dividend withholding tax, and no corporate and personal income tax will be levied on the coop's non-Dutch resident members in respect of income derived from their membership interest in the coop.

v Fiscal investment institution (FBI)

The NV, BV and a non-transparent FGR can be structured as an FBI. An FBI is subject to corporate income tax, but at a zero rate. To qualify as an FBI, certain requirements must be met, including restrictions on leverage, shareholders and members of the management board.