Effective 1 January 2025, the Netherlands has overhauled the tax‑classification rules for foreign entities by introducing new laws and decrees. These revisions markedly affect both Dutch and foreign investment funds. The new Fund Decree (Fondsenbesluit) redefines the conditions for a fund to qualify as a tax‑opaque fund for mutual account (fonds voor gemene rekening; FGR) and introduces the concept of a ‘transparent fund’.
These changes have notable implications for foreign investors and cross‑border fund structures, so a thorough reassessment of the fiscal sustainability of each structure is recommended. It is important to verify the impact on existing structures, as many entities have switched from opaque to transparent as of 1 January 2025—potentially triggering several tax consequences. Equally important, when setting up new vehicles, sponsors should ensure that the envisaged structure functions from a tax perspective, taking the new classification rules into account.
Redefinition of FGR
Redefinition of FGR Under the new decree, a fund is treated as an FGR—and therefore as a separate taxpayer—only if it satisfies all of the following conditions:
- Collective Investment: The fund must be established for collective investment purposes (i.e. pooling capital from multiple investors).
- Investment Strategy: It should pursue a standard portfolio investment strategy, not engaging in entrepreneurial activities.
- Regulatory Qualification: The fund must qualify as an investment fund or a fund for collective investment in transferable securities (UCITS) under the Dutch Financial Supervision Act (Wet op het financieel toezicht or Wft).
- Transferability of Interests: Participations are embodied in transferable units. The former requirement for unanimous consent to transfer units—previously decisive for tax transparency—has been abolished. Units are deemed tradeable unless they can be redeemed only by the fund itself (or are effectively routed through the fund under specific secondary‑trading restrictions).
Each of these elements must be verified when determining entity classification.
Introduction of Transparent Fund
Funds that fail to meet all FGR criteria may be classified as ‘transparent funds’. These vehicles are tax transparent: the fund itself is not subject to corporate income tax; instead, investors are taxed directly on their pro‑rata share of income. This class is particularly relevant for redemption‑only funds, whose units are non‑transferable, and for non‑regulated funds without legal personality.
If a fund qualifies as neither an FGR nor a transparent fund, the Netherlands will generally adopt the tax classification of the fund’s country of incorporation—opaque or transparent, as applicable. However, a non‑comparable fund incorporated in the Netherlands is always treated as opaque by the Dutch Tax Administration.
Implications for Foreign Investors
Foreign investors and fund managers should carefully assess their fund structures in light of the new decree:
- Tax Classification: Funds previously considered opaque may now be reclassified as transparent, altering their tax obligations in the Netherlands.
- Regulatory Alignment: Funds must ensure they meet the specific criteria outlined in the decree to maintain their desired tax status.
- Cross-Border Considerations: Foreign funds with structures not directly comparable to Dutch entities may face challenges in classification, necessitating a thorough review to determine their tax treatment under the new rules. Especially foreign fund vehicles with legal personality require additional attention.
In conclusion, foreign investors should revisit their Dutch fund holdings. Many sponsors are adopting redemption‑only terms to preserve fiscal transparency. Please contact us to discuss the appropriate steps for your specific structure.
If you wish to discuss these topics, please contact:
Atlas Tax Lawyers
