In our Newsalert dated October 2024, we mentioned that it was proposed to amend the earnings stripping rules in such way that the EBITDA threshold would increase to 25% in order to bring the Dutch earnings stripping rules more in line with the implementation in other EU Member States. Furthermore, we mentioned that for real estate entities the rules would be tightened, based on which real estate entities were no longer allowed to apply the EUR 1m threshold as per 1 January 2025.

Based on a newly adopted amendment, the EBITDA threshold is to be increased to 24.5% (instead of 25%) per 1 January 2025. The EUR 1m threshold remains available for real estate entities and is not abolished for those entities per 1 January 2025.

As from 2025, the Dutch classification rules for Dutch partnerships (commanditaire vennootschap, CV) and foreign partnerships will be amended, in such way that in general Dutch and comparable foreign partnerships are considered tax transparent for Dutch income and withholding tax purposes. The existing unanimous consent requirement will no longer apply as from 1 January 2025. We also refer to our previous Newsalert for more details.

A decree (“Decree") has been published on 9 November 2024 providing the rules to qualify foreign entities (including partnerships) for Dutch tax purposes. If based on the criteria listed in the Decree, a foreign entity is comparable with a Dutch partnership, such entity will in principle be transparent for Dutch income tax and withholding tax purposes. However, based on the Decree there is an exception for partnerships that qualify as a fund for joint account (fonds voor gemene rekening, FGR). In that case, the qualification as FGR prevails and the fund (partnership) could either be transparent or non-transparent for Dutch tax purposes.

Based on the information known so far, the precise criteria based on which the classification as fund for joint account needs to be done i, are still unclear. Depending on the precise criteria a broad range of partnerships may potentially be reclassified and considered non-transparent for Dutch tax purposes.

As a general rule, as from 1 January 2025 funds for joint account are tax transparent, unless:

• the fund qualifies as an investment fund (AIF) or undertaking for collective investment in transferable securities (UCITS) within the meaning of article 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft);
• the activities of the fund are not considered an active business for Dutch tax purposes;
• the participations in the fund are transferable, whereby participations are not considered transferable if they can only be transferred to the fund itself by way of redemption.

A fund needs to meet all the requirements outlined above in order to be classified as (non-transparent) fund for joint account. Particularly, whether a fund carries out business activities or not, is subject to interpretation and the outcome of this test may be uncertain and subject to debate (with the tax authorities).

Investment funds that may be faced with the above outlined reclassification of the fund (partnership) into a fund for joint account for Dutch tax purposes, could consider the following.

In principle, it should be possible to amend the fund terms in such way that participations in the fund can only be transferred to the fund itself by way of redemption. This limits the possibilities for a direct transfer of participations between investors. However, provided properly implemented in the fund terms and followed in practice, a secondary trade between participants should still be possible. This requires however the issuance and redemption of participations in the fund are handled by the (manager of the) fund.

Amending fund terms may take some time, particularly where the approval of investors and other stakeholders is required to change the fund terms at all. Therefore, some transitional rules are adopted. Based on this provision, the participations in a fund are deemed to be not transferable with effect from 1 January 2025 if:

(i) the fund for joint account (or a comparable foreign fund) would, without the introduction of the transitional provision, would become liable to Dutch tax from 1 January 2025;

(ii) the fund was not liable to tax immediately prior 1 January 2025 (ie, qualified as tax transparent prior to 1 January 2025);

(iii) by 31 December 2025 at the latest, the participations in the fund can only be transferred to the fund itself; and

(iv) the intention to meet this condition already existed before 1 January 2025.

So funds are allowed to amend their fund terms during 2025, without becoming non- transparent funds for joint account per 1 January 2025.