The Netherlands - Tax

As from 1 January 2025, the Dutch entity classification rules have changed. Reference is made to our previous quarterly updates for more details. In summary, the non-transparent tax classification of the open limited partnership is abolished, making all partnerships tax transparent by default for corporate, income, dividend and withholding taxes. This applies to both domestic partnerships and foreign equivalents. Exceptions apply if a partnership qualifies as a mutual investment fund (‘fonds voor gemene rekening’, “FGR”, see below) or a reverse hybrid entity, which are treated as non-transparent for Dutch tax purposes. These changes may have triggered immediate tax settlements, if transitional/deferral rules could not be applied.

Simultaneously, the definition of the FGR has been revised. As from 1 January 2025, partnerships can also be considered an open FGR, making them non-transparent for Dutch tax purposes (thereby effectively reversing the abovementioned main rule that partnerships are always considered transparent). In short, an entity/partnership is considered an open FGR (non-transparent) if (i) it is considered an alternative 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’), (ii) the activities of the fund not considered an active business (‘onderneming’) for Dutch tax purposes and (iii) the ownership interests/units in the fund are transferable. However, as transitional rule, funds could opt until 1 January 2025 to retain tax transparency, if they change their documentation by the end of 2025 in such way that their ownership interests/units are only transferable to the fund itself (‘inkoopfonds’).