As from 1 January 2025, all Dutch and non-Dutch partnerships are, as a main rule, classified as transparent for Dutch tax purposes, except when a partnership should be considered an FGR. At the same time, an amended FGR definition was introduced.
These changes bring investment funds that are structured as a Dutch or non-Dutch limited partnership (or other type of partnership entity) in scope of a possible (often unintended) (re)classification into a non-transparent vehicle for Dutch tax purposes. In the below, we will summarise the current state of play in this regard focussing on the impact on Dutch and non-Dutch limited partnerships.
FGR definition
Since 1 January 2025, a limited partnership will (only) be (re)classified as a non-transparent FGR if the following four cumulative criteria are met:
- The limited partnership should invest for joint account (i.e., it should be established for collective investments).
- The limited partnership should have a strategy that is classified as ‘normal’ portfolio management (i.e., generally not a ‘value-add’ strategy).
- The limited partnership should qualify as an ‘investment fund’ (i.e., an AIF) or ‘fund for collective investment in tradeable securities’ (i.e., a UCITS) within the meaning of the Dutch Financial Supervision Act (Wet op het financieel toezicht).
- The participations in the limited partnership should be embodied by ‘tradeable participation certificates’, whereby participation certificates are (only) not considered tradeable if they are only transferable to the investment fund by way of redemption.
Reference is also made to our website post of 10 December 2024 and our Quoted on this topic for further background and the uncertainties and issues in relation to these criteria.
State of play
- Additional guidance on the amended FGR definition was set out in a decree published in December 2024, which was updated in December 2025 (see our website post for details).
- Due to various issues and uncertainties relating to the amended FGR definition, even after the decree, a public consultation was launched in the beginning of 2025 to obtain input from the market, in particular relating to the (re)classification of Dutch and non-Dutch limited partnerships as non-transparent FGRs.
- In June 2025, a letter (Fund Letter) was published in which the Dutch State Secretary for Finance announced further investigation into the possibility of additional amendments to the FGR definition to take away certain issues and uncertainties identified as ‘bottle necks’ (see our website post of 13 June 2025 and our Quoted on this topic for details).
The latest:
- On 15 December 2025, the Dutch Ministry of Finance published a consultation proposal containing a draft legislative amendment to the FGR definition and the introduction of an optional opt-out regime (afmeldregeling) for Dutch tax purposes. We refer to our website post on this topic, in which we have elaborated on the details of the consultation proposal.
- The consultation is now closed for input. A general view that can be derived from the various consultation reactions is that the opt-out regime being proposed is too strict and not workable in its current form.
- Most consultation reactions, propose (and prefer) an opt-in regime as an alternative, whereby all partnerships can elect to be treated as non-transparent FGR if they meet all relevant conditions.
- Following the consultation, the Dutch Ministry of Finance will determine whether and how the draft legislation will be submitted to parliament. Any legislative change is expected to take effect no earlier than 1 January 2027.
Grandfathering rules
In anticipation of amendments to the current FGR definition, grandfathering rules are available for (non-)Dutch limited partnerships that classified as tax transparent prior to 2025 and would be (re)classified as a non-transparent FGR as of 1 January 2025 based on the abovementioned criteria. This means that limited partnerships that might not have been able to apply the previous grandfathering rules (as outlined in our Quoted) may nevertheless (temporarily) retain their tax transparent status (with effect from 1 January 2025 until the new rules enter into effect).
The grandfathering rules intend to avoid short periods of non-transparency (and therefore a liability to tax), as the Dutch government anticipates that less limited partnerships will qualify as an FGR going forward following the expected further amendments to the FGR definition. In conclusion, these grandfathering rules provide for additional discretionary flexibility for (non-)Dutch investment funds that were transparent under the rules prior to 1 January 2025 and want to continue that status. Further to the parliamentary process, entities established on or after 1 January 2025 are also eligible to apply the grandfathering rules.
Limited partnerships established prior to or during 2025 may opt to apply these grandfathering rules, subject to the following conditions:
- The Dutch or non-Dutch limited partnership existed and classified as tax transparent prior to 2025 (this condition only applies to entities established prior to 1 January 2025);
- The limited partnership would, under the current FGR definition, be (re)classified as a non-transparent FGR as of 1 January 2025 (or as of its date of establishment, if on or after 1 January 2025); and
- The limited partnership can demonstrate the intention to retain its tax transparent status, i.e., (a) the limited partnership has demonstrated, prior to 1 January 2025, its intention to implement a redemption mechanism (irrespective of whether the redemption mechanism was actually implemented or not), or, if this intention was not demonstrated prior to 1 January 2025, (b) the limited partnership and its participants choose to retain the transparent status ultimately on 28 February 2026, and such choice can be demonstrated.
- Insofar the above 3 conditions are met, the limited partnership should further demonstrate its intention to opt-in to these grandfathering rules by not registering as an FGR with the Dutch tax authorities (and accordingly not filing a Dutch corporate income tax return starting 2025). The limited partnership shall then (automatically) continue to be treated as a transparent vehicle by the Dutch tax authorities for the time being.
Limited partnerships established on or after 1 January 2026, which would under the current definition classify as a non-transparent FGR, may apply the grandfathering rules as well, by electing a transparent classification.
The grandfathering rules apply from 1 January 2025 until 1 January 2028, whereby this period of application may be shortened if the amendments to the FGR definition enter into effect before that moment (e.g., on 1 January 2027). Additionally, further grandfathering rules may be proposed at such time.
Take-aways
- While legislative proposals to amend the FGR definition are underway, there is currently a period where limited partnerships have to deal with the FGR definition as applicable today, and the issues and uncertainties arising therefrom. It may take (at least) until 1 January 2027 until any changes in legislation will enter into effect.
- The consultation proposal may be relevant for Dutch and non-Dutch limited partnerships that have become, or may become, classified as an FGR under the Dutch tax classification rules. Given the consultation status, affected parties should closely monitor developments and assess potential structuring implications. We will remain actively involved in the consultation process.
- On the positive side, the grandfathering rules may provide relief to the moment that any changes in legislation will enter into effect. This should be analysed on a case-by-case basis and action should be taken timely.
Loyens & Loeff has ample experience on this topic. We are well placed to advise on these matters as we can provide combined tax, legal and regulatory advice in relation hereto.
Should you have queries or need any assistance, please contact your trusted adviser at Loyens & Loeff or one of the specialists mentioned below.
