Adjustment of earnings stripping rule for real estate entities likely off the table

To prevent real estate entities from splitting up to make use of the € 1 million threshold multiple times, the Dutch government intended to tighten the earnings stripping rule for certain qualifying real estate entities per 1 January 2025. As a result of this tightening, this type of taxpayer would no longer be able to make use the €1 million threshold, and the calculation of the deductible interest would rely solely on a percentage of fiscal EBITDA.

Various groups have criticized the proposed tightening. During political discussions about the Budget Plan 2025, it turns out that there is consensus within the Dutch government to cancel this amendment. This would mean that the EUR 1 million threshold per taxpayer would continue to be available after 2024. It is still unclear whether the government intends to address the undesirable “splitting behaviour” in another way.

To finance the withdrawal of the tightening, it seems there is a desire to limit the room for interest deduction above €1 million to 24.5% of the EBITDA, instead of the previously proposed 25%.

If the Dutch government complies with this (revised) intention, this is good news for the Dutch real estate market.

Questions?

If you have any questions, please don’t hesitate to contact our colleagues of the real estate team.