We recommend reviewing your structure and confirming the impact of the new qualification rules. If the new qualification rules adversely impact your structure, then we advise to take action as soon as possible to benefit from the transitional law in 2024.
Please reach out to your Baker McKenzie contact person.
Changes to the qualification of Dutch CVs and comparable foreign legal forms from a Dutch tax perspective
Under current law, a Dutch CV or comparable foreign partnership can be either transparent or non-transparent from a Dutch tax perspective, depending on whether the entry, exit and replacement of limited partners is only possible with consent of all (general and limited) partners. This is known as the "unanimous consent requirement". As of 2025, the unanimous consent requirement will be abolished. Consequently, all Dutch CVs and comparable foreign partnerships will in principle be considered transparent for Dutch tax purposes.
Following the abolishment of the unanimous consent requirement, Dutch CVs and comparable foreign partnerships that are currently non-transparent will become transparent. As a result, they are deemed to transfer all assets and liabilities to the investing limited partners at fair market value. For Dutch tax resident CVs and comparable foreign partnerships, any gain realized on the deemed transfer is in principle subject to Dutch corporate income tax. In addition, the investing limited partners are deemed to dispose their interest in the Dutch CV or comparable foreign partnership at fair market value which could also trigger a taxable gain in the Netherlands.
To avoid immediate taxation as a consequence of the new rules becoming effective, transitional law provides for roll-over relief and other facilities (e.g., share-for-share merger facility and payment in installments). The transitional law is effective from 1 January 2024 to 31 December 2024.
Step plan to determine whether a foreign legal form is transparent or non-transparent under the new rules
Under the new rules, the following step plan can be followed to determine if a foreign legal form is considered transparent or non-transparent from a Dutch tax perspective:
1. Determine if the foreign legal form is comparable to a Dutch legal form based on the Comparability Decree. If so, then the Dutch tax qualification of the foreign legal form as either transparent or non-transparent is the same as the Dutch tax qualification of the comparable Dutch legal form. For example: foreign legal forms that are comparable to a Dutch limited liability company (BV) are considered non-transparent from a Dutch tax perspective under the new rules. As mentioned, foreign legal forms that are comparable to a Dutch CV or other partnership are considered transparent from a Dutch tax perspective under the new rules.
2. If the foreign legal form is not comparable to a Dutch legal form based on the Comparability Decree, then two additional qualification methods apply:
i. If the foreign legal form is tax resident of the Netherlands, then the foreign legal form will be considered non-transparent (i.e. a corporate income taxpayer in the Netherlands).
ii. If the foreign legal form is not tax resident of the Netherlands, then the Netherlands will follow the tax qualification from the jurisdiction in which the foreign legal form is tax resident.
In the explanatory notes to the new rules, the Limited Liability Partnership (LLP) under British law, the Unlimited Company (ULC) under Irish law and the Kommanditgesellschaft auf Aktien (KGaA) under German law are specifically mentioned as examples of entities that are not comparable to a Dutch legal form. That means that the Netherlands will follow the qualification as transparent or non-transparent from the jurisdiction in which such entity is tax resident, provided that the entity is not tax resident of the Netherlands.
Recommended actions
The new rules may impact structures involving Dutch legal forms or Dutch investors, particularly:
1. Structures that involve a Dutch CV that is currently non-transparent from a Dutch perspective.
2. Structures that involve a foreign legal form that is comparable to a Dutch CV, which is currently non-transparent from a Dutch perspective.
3. Structures that involve a foreign legal form that is not comparable to a Dutch legal form.
We recommend reviewing your structure and confirming the impact of the new qualification rules. If the new qualification rules adversely impact your structure, then we advise to take action as soon as possible to benefit from the transitional law in 2024.
Please reach out to your Baker McKenzie contact person.
