€1M interest deduction threshold maintained for real estate entities

Good news; the Dutch government decided to maintain the €1 million interest deduction threshold, also for real estate entities. Earlier this year, the Dutch government announced to eliminate the €1 million threshold in the earnings stripping rule as of 1 January 2025. The consequences hereof would have been that the deductible interest for such real estate entities is limited to a percentage of the fiscal EBITDA.

Recently, we already reported that the government intended to maintain the €1 million threshold for real estate entities (see link). The Dutch House of Representatives has now agreed with this.

Three further comments in this respect:

1. The Senate still needs to approve the proposal, voting is scheduled for 17 December 2024. The Senate can only approve or reject the 2025 tax plan in its entirety. Now that the most politically sensitive points have been removed from the plan, it is expected that the tax plan will be approved.
2. It has been announced that further investigation will be conducted into potential abuse situations, such as the splitting up of real estate entities. This might result in anti-abuse rules being added to the interest deduction limitation rule later on.
3. The other threshold (i.e., the EBITDA limit) will be 24.5%. It is currently 20%, was announced to be increased to 25% and will now end at 24.5%. This is in fact only relevant for interest deduction above €1 million.
   

Further to the above, each separate real estate entity is expected continuing being allowed to deduct interest for at least €1 million per year.

Questions?

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