It is now late 2020 and a current hot topic is the reduced transfer tax for starting home owners. What is exciting about that?
Transfer tax – what is that?
In the Netherlands tax is due when you purchase property. The proceeds are used for funding general Government costs such as health care and infrastructure. It was introduced under Spanish occupation by Alva at a rate of 10%. After the 80 year Spanish war that lasted 68 years (trivial pursuit question) the Dutch very much liked this source of income. Now it is being updated.
Reduced transfer tax – what will change?
Starting from 2021 there will be a 0% rate, a 2% rate and a 8% transfer tax rate.
0% Transfer tax rate
Under the condition that:
– you purchase a home starting from January 1, 2021 in the Netherlands;
– purchased by a private individual, who will dwell in the house him or herself and has made the appropriate statement to that effect;
– a person who is in the age between 18 and 35 years old;
– who applies for the first time for this zero transfer tax rate,
then the zero percent transfer tax rate can be applied.
2% Transfer tax rate
The 2% transfer tax rate applies already and will apply starting from January 1,2021 when the conditions set out under the 0% transfer tax rate are not being met. A condition is that the home purchased is used for own dwelling and it is not commercial property.
8% Transfer tax rate
The 8% transfer tax rate applies to all situations in which property is purchased that does not qualify for the 0% or 2% transfer tax rate.
The purchase commercial property such as an office, shop, restaurant etc, 8% transfer tax applies.
When the buyer of the property, commercial or non-commercial, is a company or legal vehicle, 8% transfer tax applies.
And when the buyer of the property is going to rent out the property, 8% transfer tax applies. Even if the property is in the end not rented out, but only fixed up and sold.
We think tax-is-exciting. Moreover we think that the zero percent under the mentioned conditions is a good step for the target group. We noticed that the 8% rate applies if a company purchases a private home. Unless an employer likes to facilitate employees with housing, we never think a company should purchase a home. In the Netherlands we do not know the concept of capital gain tax for private individuals. For companies we do know the concept of capital gain tax. Under the current market situation a gain is very likely to be achieved at sale, hence we recommend not to use a company to obtain ownership of a home.
Sorry for the dashes in the middle of the word Tax-is-Exciting. Apparently Google has a dirty mind and sees only a three letter word that we refer to when we practice to reproduce ourselves. Anything related to that word is spam, hence this devout solution.