The Dutch legislative proposal to amend the investment regime goes to consultation

The consultation on the VBI, FBI and FGR regime closes on 5 April 2023

On 8 March 2023, the legislative proposal to amend the regime of the Dutch tax-exempt investment institution (VBI), fiscal investment institution (FBI) and joint account fund (FGR) (Mutual Fund, Exempt Investment Institution, and Fiscal Investment Institution Amendment Act) was published for public comment.

Major changes

The most important changes in the proposal are:

  • The FBI can no longer invest directly in real estate as of January 1, 2025 (indirect investments through a regularly taxed company are still permitted); and
  • the definition of FGR will be changed in such a way that only FGRs that (i) are regulated by Dutch financial supervision (WFT) legislation and (ii) have publicly traded holdings are opaque for Dutch tax purposes.

Currently, these investment institutions are generally used by foreign investors and (high net worth) individuals and families to structure their investments. The new rules aim to bring the actual use of these investment institutions in line with their original purpose – joint investments by a (large) group of investors – and restore tax rights on Dutch real estate investments by foreign investors. The intended target at the moment may not reflect what actually happens due to the 0% tax rate of the FBI, in connection with (partial) relief under the applicable tax treaties or domestic exemption.

As a result, if this legislative proposal goes into effect, it may be beneficial for (high net worth) individuals and families to restructure their investments from FBIs to (transparent) FGRs.

The Dutch government has foreseen the need for restructuring as a result of the proposal. The proposal therefore includes a specific temporary real estate transfer tax (RETT) exemption to facilitate such restructurings.

Changes in Joint Account Fund Regime

Currently, the qualification of an FGR as tax transparent (closed FGR) or opaque (open FGR) is based on the so-called accession requirement (entry requirement) or redemption requirement (purchase requirement).

This means that an FGR is transparent if (i) participations in the FGR can only be transferred with the unanimous consent of all participants, or (ii) participations can only be transferred by redemption from the FGR or transferred to a limited group of relatives. An FGR with (unlimited) transferable holdings therefore qualifies as non-transparent for Dutch tax purposes. Comparable foreign entities are generally classified for Dutch tax purposes based on the same rules.

Under the proposal, the FGR will only be non-transparent if the FGR is (i) regulated by the WFT and (ii) the holdings in the FGR are tradable. In all other situations, FGR will be qualified as tax transparent.

This means that family FGRs that currently qualify as opaque and potentially apply the VBI regime may become transparent and no longer apply the VBI regime (as most family funds will not qualify as investment institutions under the WFT).

Due to the change in the nature of FGR from opaque to transparent, the assets and liabilities of FGR are deemed to be transferred from FGR to its participants and the participations in FGR are deemed to be sold by the participants at their fair market value for Dutch tax purposes.

This may result in an immediate payment of tax in cases where the book value of the assets deemed to be transferred is less than the fair market value of those assets.

In addition, real estate transfer tax may be due in cases where the FGR’s assets consist (partly) of real estate.

As these changes may lead to “dry” taxation, several reliefs are offered:

  • transferability (in case all participants are subject to Dutch corporate income tax);
  • a share-for-share merger mechanism, including (under certain conditions) an exemption from RETT (in case participants are individuals and wish to transfer their participation in FGR to a (newly incorporated) legal entity. In this way, individuals can effectively establish the same possibility of transfer that is available to legal entities); and/or
  • deferred payment (spread over a maximum of ten years).

Proposed changes to the tax-exempt investment institution

The proposed changes to the VBI regime are consistent with the changes to the FGR. Only subjects regulated by the WFT are eligible for the VBI regimen.

Changes in the fiscal investment institution

Currently, there are (effectively) two types of FBIs: real estate FBIs and securities FBIs. As the name suggests, a real estate FBI invests only in real estate, while a securities FBI invests only in stocks, bonds, and other financial instruments.

Under the proposal, the FBI can no longer directly invest in real estate, and as a result, the Real Estate FBI would be eliminated.

Indirect investment in real estate through (opaque) real estate investment companies is still allowed under the proposal. It provides for a specific temporary exemption from RETT (which only applies in 2024 and under certain conditions) in situations where the economic ownership of the immovable property needs to be restructured to create a tax transparent and tax neutral structure as a result of the abolition of real estate FBI.

A typical restructuring where the RETT exemption applies usually consists of the following steps. FBI:

  • forms an FGR and acquires a share in this FGR;
  • transfers the economic ownership of the real estate to the Federal Republic of Germany through contribution on the participation in the Federal Republic of Germany;
  • transfers the acquired participation in the FGR to its participants;
  • will be converted into a trustee foundation (foundation trustee), which will act as the holder of the legal title to the real estate.

The RETT exemption will not apply in situations where legal ownership is transferred or in the event of a restructuring that does not result from the offer.


Public consultation on the proposal closes on 5 April 2023.

The FGR and VBI changes are scheduled to take effect on January 1, 2024. The changes to the FBI regime will take effect one year later, on January 1, 2025.

Commentary by Osborne Clarke

The proposed rules could potentially have a significant impact on existing fund structures, particularly existing FGRs or comparable foreign entities that do not currently apply the redemption requirement.

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