Dutch Coalition Agreement: Optimistic Outlook For Real Estate Market And Investment Climate

Improving the investment climate is at the top of the agenda of the three political parties (D66, CDA and VVD, the Coalition) that will form the new government of the Netherlands. Last Friday, the Coalition presented their plans with the motto ‘Aan de slag. Bouwen aan een beter Nederland.' which means ‘Get going. Building a better Netherlands'. The plans aim to solve certain critical issues for the Netherlands and to enhance the investment climate, including the Dutch real estate market, by creating stable (tax) policies and, amongst others, further reduction of the real estate transfer tax rate. With the clearly articulated ambition to end unnecessary gold-plating of EU rules, a relaxation of the rules on interest deductibility may also come within reach.

In Dutch real estate, the most pressing issue is the shortage on the housing market, including student housing. The Coalition eyes 30 locations for large scale residential projects and prioritises infrastructure projects. Per annum EUR 1 billion will be made available for affordable housing, whilst the law on affordable rent will be evaluated and optimised. Objection procedures will be amended to allow shorter timelines. Co-living and student housing regulations will become less strict. For the broader real estate market, it is notable that amendments are proposed to the nitrogen deposition calculation rules. In addition, business parks around regional innovation clusters will be allowed to expand, offering more physical space for businesses.

Vast sums are needed to achieve the ambition of building 100,000 new houses per annum and this cannot come from the housing corporations and Dutch pension funds alone. To make the investment climate for residential property more attractive, changes are also proposed to the Dutch fiscal regime. This includes the following measures: real estate transfer tax will be further reduced to 7% (for investments in residential housing, not first residence in private use), a CIT incentive will be introduced for housing corporations and the income tax regime for individuals (box 3) will be reformed into a capital gains based system. For first residences, mortgage interest deduction rules are proposed to remain unchanged. As sustainability is an important element as well, the existing incentives (EIA/MIA/VAMIL) will be transformed into one robust investment scheme and the SDE++ subsidy for sustainable energy will be extended.

For the investment climate in general, stability in (tax) policy has often been cited as one of the most important aspects in making an investment decision and setting up a business in the Netherlands. In light hereof, the Coalition agreement confirms that whilst they are in office there will be no increase of the CIT rate. Furthermore, crucial features such as the participation exemption, loss compensation rules, innovation box (9% CIT), R&D wage tax credit (WBSO), expat regime and closely held business succession scheme (BOR) will remain untouched. Perhaps even more importantly, it is clearly stated that the Coalition will end unnecessary gold-plating of EU rules. Subject to approval of parliament and sufficient budget, this may include proposals on interest deduction (earnings stripping/ATAD), possibly through introduction of the so-called ‘group escape' or increasing the current EBITDA cap from 24.5% to 30%, and more equal treatment of foreign pension funds to their Dutch peers, when investing in the Netherlands.

As the Coalition does not have a majority in Parliament it will need to find support from other parties. Nevertheless, we believe that the Coalition agreement is good news for the investment climate and gives a positive outlook for investing in Dutch real estate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.