New real estate clause will affect inbound investors
Germany and the Netherlands signed a new tax treaty on 12 April 2012 to replace the existing treaty dating from 1959. The instruments of ratification between both countries were exchanged in October 2015, with the treaty entering into force on 1 December 2015. After more than three years from the date the treaty was signed, the new provisions will apply as from 1 January 2016.
One of the most notable features of the new treaty is a real estate clause in the capital gains article that will affect German inbound real estate investors. Under the new treaty, capital gains derived from the alienation of shares in a real estate company may be taxed in the state in which the property is located rather than the state in which the seller is resident. According to capital gains provision (article 13(4)) in the OECD model treaty, a real estate company is a company that derives more than 50% of its value, directly or indirectly, from immovable property.
The new provision will impact German inbound real estate investors that have structured their investment in such a way that a Dutch holding company holds shares in a German GmbH that, in turn, holds real estate located in Germany. Capital gains from the sale of shares in the German GmbH currently are not taxable in Germany and they often fall within the scope of the Dutch participation exemption. As from 2016, 5% or even 100% (i.e. in the case of a short-term share trading) of such gains may be subject to corporate income tax in Germany.
Capital gains from the sale of shares in Dutch corporations that directly hold German real estate are not affected by the new provisions if the Dutch corporation does not have its place of management and control in Germany (since Germany only has the right to tax gains under domestic law if a foreign corporation whose legal seat is outside Germany is managed and controlled in Germany).
The real estate clause in the Netherlands treaty differs significantly from the OECD model and from any other German treaty. The clause provides as follows:
Other notable features of the treaty are as follows:
www.deloitte-tax-news.de | Diese Mandanteninformation enthält ausschließlich allgemeine Informationen, die nicht geeignet sind, den besonderen Umständen eines Einzelfalles gerecht zu werden. Sie hat nicht den Sinn, Grundlage für wirtschaftliche oder sonstige Entscheidungen jedweder Art zu sein. Sie stellt keine Beratung, Auskunft oder ein rechtsverbindliches Angebot dar und ist auch nicht geeignet, eine persönliche Beratung zu ersetzen. Sollte jemand Entscheidungen jedweder Art auf Inhalte dieser Mandanteninformation oder Teile davon stützen, handelt dieser ausschließlich auf eigenes Risiko. Deloitte GmbH übernimmt keinerlei Garantie oder Gewährleistung noch haftet sie in irgendeiner anderen Weise für den Inhalt dieser Mandanteninformation. Aus diesem Grunde empfehlen wir stets, eine persönliche Beratung einzuholen.
This client information exclusively contains general information not suitable for addressing the particular circumstances of any individual case. Its purpose is not to be used as a basis for commercial decisions or decisions of any other kind. This client information does neither constitute any advice nor any legally binding information or offer and shall not be deemed suitable for substituting personal advice under any circumstances. Should you base decisions of any kind on the contents of this client information or extracts therefrom, you act solely at your own risk. Deloitte GmbH will not assume any guarantee nor warranty and will not be liable in any other form for the content of this client information. Therefore, we always recommend to obtain personal advice. |