Conditional transfer – benefit the lower (2020) real estate transfer tax rate
For real estate transactions, a ‘Groninger akte’ may offer a solution to take advantage of the lower transfer tax rate before the end of the year. With a ‘Groninger akte’ the real estate can be safely transferred under the resolutory condition of late payment of the purchase price.
The real estate transfer tax (RETT) rates and system are announced to be amended as part of the Tax Plan 2021 (Belastingplan 2021). Firstly, the default RETT rate is set to be increased from 6% to 8%. Secondly, the lower 2% rate for residential real estate would only apply to people who use the house or apartment to live there themselves. This is an important point to monitor, as this would mean that investors acquiring residential real estate would likely fall in the higher 8% RETT bracket instead of the 2% under the current rules.
A conditional transfer of real estate (by means of a so called ‘Groninger akte’) could provide a solution in cases where it does appear feasible to still reach commercial agreement on a real estate transaction this year, but where it does not seem feasible for the purchaser to also fund the purchase price prior to 1 January (e.g. in case the necessary financing cannot be timely obtained).
In such cases the transaction could be structured in such way that the legal transfer of the property involved still takes place this year, whilst the purchase price will only become payable in 2021. The transfer will then take place subject to the condition subsequent that the purchase price is not paid to the seller on the agreed moment (in 2021). The use of the condition subsequent will cover the seller’s risks of transferring the property prior to the receipt of the purchase price, as it guarantees that, in case the purchase price is not paid, the property automatically reverts to the seller.
Using this structure enables the purchase to still make use of the lower (2020) RETT rate, whilst on the other hand the transaction is from a financial perspective only completed in 2021. Should for whatever reason the transaction not be financially completed on the agreed moment in 2021 (and the property reverts to seller), the purchaser can normally request a refund of the RETT it paid in 2020.
A well structured conditional transfer can therefore secure that the parties involved bear (almost) no legal or tax risks.
For more information on this subject and the specific possibilities for a transaction you might envisage, please feel free to reach out to one of us.
Anne WentSenior Associate Senior deputy civil law notary
Anne Went, deputy civil law notary, is a member of the Real Estate practice group in our Amsterdam office. She focuses on real estate law and advises on transactions involving real estate.T: +31 20 578 52 81 M: +31 6 10 89 83 61 E: [email protected]
Joris van de BuntSenior associate Assigned civil law notary
Joris van de Bunt MRE, assigned civil law notary, is a member of the Real Estate team, the Energy team and Team Project Development. He specializes in real estate law and is focusing on project development and transaction related to real estate and renewable energy.T: +31 20 578 53 54 E: [email protected]