Background

The fiscal investment institutions (fiscale beleggingsinstellingen; FBIs) regime is a tax-neutral regime for collective investment vehicles. Broadly, it effectively eliminates taxation at the level of the investment institution and shifts taxation to the level of the investors through the annual requirement to distribute profits. The regime is subject to strict statutory requirements, including the distribution requirement and the financing limitation.

As of 1 January 2025, the Netherlands introduced new rules for the tax classification of Dutch and foreign entities. Under the new classification rules, as a main rule, all Dutch limited partnerships (commanditaire vennootschap) and foreign equivalents have become transparent for Dutch tax purposes, unless they qualify as a ‘fund for joint account’ (fonds voor gemene rekening; FGR).

As a result, interests that were previously treated as non-transparent may now be regarded as transparent for Dutch tax purposes, with the underlying assets and liabilities now being attributed pro rata to the FBI and income being recognised directly at the level of the FBI rather than at the level of the entity.

For FBIs investing through partnerships or layered fund structures, the reclassification may create practical issues for both the distribution requirement and the financing limitation. Failure to comply with these requirements can result in loss of FBI status resulting in the FBI becoming fully liable to Dutch corporate income tax.

The distribution requirement requires an FBI to distribute its profit, as determined under the rules applicable to the FBI regime, no later than in the eighth month after the end of the financial year. Following the new transparency treatment, profits realised by an underlying entity are in principle attributed to the FBI and therefore increase the amount that the FBI is required to distribute, even though the FBI has no direct legal control over those profits.

The financing limitation restricts the level of debt that an FBI may have in order to safeguard the investment character of the regime (generally at 60% for (indirect) real estate assets and 20% for other assets). Following the reclassification of an underlying entity as transparent, debts of that entity are in principle attributed to the FBI for tax purposes, even though the FBI is not the civil law debtor and does not bear the related creditor risk.

What has changed?

To address these issues, the State Secretary has introduced a temporary approval allowing FBIs, for the purpose of the distribution requirement and the financing limitation, to continue to treat certain interests as non-transparent.

This applies to interests that were held, directly or indirectly, immediately prior to 1 January 2025 and that have become transparent as a result of the classification reforms. For these interests, FBIs may determine their profit position and debt position as if no reclassification had taken place.

The approval applies for a transitional period of up to seven financial years, or, if shorter, for the period during which the FBI continues to hold the relevant interest. Where a broken financial year is used, the period from 1 January 2025 until the start of the next financial year counts as a separate year. The seven-year period reflects the State Secretary’s view that a typical investment horizon is five to seven years, allowing existing investments to be wound down or restructured during the transitional period.

After this transitional period, the FBI regime must be applied in full, taking into account the attribution of assets and liabilities resulting from the new classification rules.

The approval is subject to a written acceptance requirement. The FBI must declare in writing to the competent tax inspector that it will apply the approval for the full seven-year period, or, if shorter, for the period during which it holds the relevant interest. The declaration must be submitted within three months after the date of the decree. As the decree is dated 22 June 2026, the submission deadline is 22 September 2026.

Takeaway

This is a long awaited and very welcome relief for FBIs investing in funds that have become transparent as of 1 January 2025. Not only will this bring certainty as to meeting the requirements of the FBI regime, also for purposes of being able to prepare and file the 2025 (and further) Dutch corporate income tax returns.

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.

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Should you have queries or need any assistance, please contact your trusted adviser at Loyens & Loeff or one of the specialists mentioned below.