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How is property investment taxed in the Netherlands?

Dutch property is on demand with foreign investors. Some purchase real estate for their portfolio, others for their children to go to college or nostalgia reasons.

Taxation on property

If you live for instance in China, United States of America or the United Kingdom (random examples) you can purchase either cash or with a loan property in the Netherlands. Living abroad and investing in Dutch property makes you a non resident tax payer. You are liable to Dutch tax only for the property in the Netherlands. How is property investment taxed in Holland?

The valuation of the property is done by the local city hall. The council determines the value of real estate and this value is announced in a so called WOZ statement, and the value is referred to as WOZ value. This WOZ value is the base of all taxation related to that property. Every year early in the year the WOZ statement is issued and from that moment you have six weeks time to complaint against this value incase you have solid reasons why the value is incorrect.

A non resident tax payer is subject to 1.2% tax over the WOZ value minus a possible loan taken out to obtain the property. If no loan was taken out, then 1.2% over WOZ value is it. Rental income is disregarded, so are costs related to the maintenance of the property.Property investment

Double taxation relief

Back in your home country China, or USA or the UK you have to report your world wide assets. These countries are randomly choses, in other countries we have a tax treaty with the same applies.

The world wide assets you report is including the property you own in the Netherlands. The tax treaty with the Netherlands determines that your Dutch property can only be taxed in the Netherlands. If the Dutch property is included in your home country tax return, you need to claim a double taxation relief in such a manner that you pay nothing in your home country for the Dutch property.

BV company holding the property

Creative minds have thought up creative methods to hold the ownership of Dutch property. One of them being a BV company. Non residents suggest to incorporate a Dutch BV company which then will hold the property.

There are some issues with this structure. The first being that a BV company is tax resident in the country where the managing director is living. As you are living abroad, the BV company is situated in your country. That creates undesired issues tax wise.

If you arranged for domicile in the Netherlands by using a Trust company you can have the Dutch BV company own the property in the Netherlands, as the Trust company is assumed to be the resident managing director.

One issue solved. Another issue is that a result made by the sale of the property in the BV company is subject to capital gains tax, this is not the case if the property is owned by you personally directly.

No capital gains tax

In the Netherlands we do not know capital gain tax for private individuals. Making a profit with sale of share, stocks, options, real estate is of no fiscal interest. Taxed is the economic value or in case of property the WOZ value as per January 1 of the fiscal year.

Orange Tax Services

We will be able to assist you with your fiscal liability as non resident tax payer in case you purchased property cash or when the WOZ value exceeds the value of the debt taken out to purchase this property.

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