Buying Dutch property with foreign funds could be your family helping you out. Foreign funds are looked at carefully.
Buying Dutch property with foreign funds
The moment you purchase a Dutch property with foreign funds, the first obstacle will be transferring the funds. We are frequently asked how much is the tax on transferring money from abroad.
The Dutch Government does not tax money transfers from abroad, the Dutch Government welcomes money arriving from abroad. No transfer tax on a money transfer.
The notary is a person sworn in by the King and in between the client and the Government. As much as our Government welcomes money from abroad, the notary treats this differently.
The notary collects the purchase value of property from the buyer and pays the seller when the transfer of this property has taken place. There is not alternative for this process.
The notary sees money arriving from abroad and is obliged to investigate where this money comes from. The anti-money laundering and terrorism act makes this investigation necessary.
The family abroad need to explain how the money was obtained in the first place. If you use foreign funds, contact the notary of your choice for the transfer of the property well in advance. Ask what you need to provide in documentation to have verified the source of the money.
The family – a gift
The family can provide you with the foreign funds as a gift. If indeed a gift, gift tax in the country where the person giving is living applies.
The exception to this rule are twofold. If your family was a tax resident less than twelve months before in the Netherlands, Dutch gift tax applies. If your family has the Dutch nationality, the gifts made within ten years after leaving the Netherlands, are taxed in the Netherlands.
The family – loan
The family could choice to make the funds a loan. That is often done in the situation of more siblings to whom the parents are not able to donate the same. To avoid the traditional fight over the deceased about the inheritance, a loan can just solve that.
A loan is a loan when there has been agreed an interest percentage to be paid, repayment schedule set and collateral for the loan. In case of a property purchased in the Netherlands, the collateral is obviously the property. If no collateral can be provide, this should reflex in a higher interest percentage.
The all-time question is about the interest percentage. That is influenced by the market and the family relation. We often ask if that interest percentage would also apply to us. The answer brings the percentage more in perspective.
Tax is exciting
We think tax is exciting. We are excited about you being able to purchase a Dutch property with the help of your family. The money transfer is not a problem, but the notary would like to know more about the source of the money. At the end of the year you need to file your income tax return. We will be pleased to assist you.