Exemption from transfer tax: Contribution to a Legal Entity

Transfer tax is the tax you pay when you purchase real estate in the Netherlands, such as homes, business premises or land, or when you acquire rights to it (e.g. leasehold or apartment rights). The levy is calculated on the higher of the purchase price or market value. Until 2025, the following transfer tax rates apply: 0% for starters who fall under the conditions of the starter exemption, 2% for a home that is used as a main residence and 10.4% for other real estate, such as investment properties, vacation homes and business real estate.

In the 2026 Tax Plan, the cabinet proposed to amend the rules. The House of Representatives and Senate have yet to agree to the proposal. From 1 January 2026, it is proposed to apply a new rate of 8% transfer tax for homes that do not serve as primary residence — for example rented homes, vacation rentals and investment properties. For buyers of their own home, the low rate of 2%, as well as the starter exemption, will remain subject to conditions. The general rate of 10.4% remains in force for non-residential properties, such as business premises and land for construction. This change will make buying an investment home slightly more fiscally attractive from 2026, while the position of starters and home buyers remains unchanged.

Welcome to the second article of the Port Sight Tax Transfer Tax Exemption Series. In these short reads, we take you through the various transfer tax exemptions. This way, you know exactly when you do not have to pay transfer tax and what conditions are associated with it. This week, we will discuss the exemption for contributions to a legal person (BV/NV).

Transfer tax exemption for contributions: what is it exactly?

A “contribution” occurs when goods are transferred as a deposit on issued shares within the meaning of Book 2 of the Civil Code. A transfer tax exemption can - subject to conditions - apply if immovable property is transferred to a company.

The reason this exemption is included in the law is because the legislator does not want to interfere with (business) economic decisions with tax levies. This includes, for example, a one-man business that does not want to convert to the BV, because then you pay transfer tax. would must be. Due to the exemption, the entrepreneur's choice is not limited by taxation.

Conditions for the application of the transfer tax exemption when contributing to a legal person

The transfer tax exemption for contributions to a legal person applies if the following three cumulative conditions are met:¹

1. There is a contribution by a company against the distribution of shares. The company must be remunerated for at least 90% in shares;
2. There is an entire company's contribution to a newly created BV or NV; and
3. The contributors are entitled wholly or almost entirely in the same proportion to the share capital as the ratio in which they were entitled to the company before the contribution.

Condition 1: There is a contribution by a company against the distribution of shares. The company must be remunerated for at least 90% in shares.

As mentioned earlier, there is a contribution as soon as goods are transferred as a deposit on issued shares. If there is a contribution by a company to a BV, this can be done by paying the company's value into the BV against shares to be issued or by payment from the BV to the owner of the company. For the purposes of the transfer tax exemption, the BV may reimburse the company a maximum of 10% of the company's value in cash. The remaining 90% must be reimbursed in shares to be issued.

This condition was created to prevent a contributor from contributing an immovable property and receiving money in return, without levying transfer tax.

To illustrate, the following example: An entrepreneur brings his one-man business, worth €1,000,000, into a newly created BV. Due to the 90% requirement, the entrepreneur may be reimbursed a maximum of €100,000 in cash for his contributed sole proprietorship. The remaining €900,000 must be considered as a deposit on the shares for the purposes of the exemption.

Condition 2: There is a contribution by an entire company to a newly created BV or NV.

The contribution exemption only applies if there is immovable property that is part of a contributed entire company. The term “company” should be explained in a broad way. This can usually be followed by the meaning of the Income Tax Act 2001, namely a “taxpayer on whose behalf a company is operated and who is directly linked for obligations concerning that company.” In practice, this is actually about sole proprietorship, or shareholding in a company under firm (VOF), limited partnership (CV), or partnership.

It is therefore only possible to transfer an immovable property to a BV or NV without levying transfer tax if this property forms part of the company. This is where “asset labeling” comes into play. Indeed, the immovable property must be part of the company's assets. This includes immovable property that is used to operate the company, such as the factory premises of a chip machine manufacturer. In short, immovable property that is used for private purposes is not part of business assets and therefore does not qualify for the exemption.

According to the literal legal text, the contribution must take place in a company specially created for that purpose. However, a recent decision by the Secretary of State for Finance approved that the exemption can also be applied - subject to conditions - if a company contributes to an existing BV.²

Condition 3: The contributors are entitled wholly or almost entirely in the same proportion to the share capital as the ratio in which they were entitled to the company before the contribution.

If a joint company is invested in a BV or NV (such as a VOF, partnership or CV), for the purposes of the exemption, the share ratio after contribution must be equal or almost the same as the division of the joint company's equity for contribution.

To illustrate, the following example: Jan, Mahmoud and Lisa operate a VOF together. The equity share is 25%, 25% and 50% respectively. The VOF's business assets include immovable property. The trio would like to continue their business in the BV. About a farm cash-out to prevent, they rely on the transfer tax exemption for the property. As a result, once they are in the BV, they must retain the same rights over the company as in the VOF. This means that Jan should acquire 25%, Mahmoud 25% and Lisa 50% of the shares in the BV.

Conditions for maintaining the exemption

If the above conditions are met, the transfer tax exemption will be granted. However, after the grant, the exemption can be withdrawn if you do not comply with the arrest and continuation requirement.³

The arrest requirement means that the acquired shares may not be disposed of for three years. If there are multiple contributors, this requirement applies to all of them. There is an exception to the retention requirement, namely if the shares are disposed of in the context of a merger, internal reorganization or division⁴.

In addition, the continuation requirement also applies. This requirement means that the recipient company will continue the business for three years. This requirement is not met, for example, if the BV brings the company into a partnership within three years, after all, the BV does not continue the business.⁵ The same exceptions apply to the continuation claim as to the arrest claim.

Application of transfer tax exemption in practice

Despite the fact that there is an exemption (which means that no transfer tax is due), a return must still be filed. So also file a declaration when applying the exemption to avoid fines!

Lastly

When you invoke a transfer tax exemption, it is important to comply with the legal conditions.

Are you unsure whether you meet the conditions? Be sure to contact one of our advisors.

References

¹ Article 15, paragraph 1, section e, point 2, BRV Act.

² Decision of October 17, 2024, 2024-10969, Stcrt. 2024, 33456, V-N 2024/53.10, section 3.3.

³ Article 5, paragraphs 5 and 6, BRV Implementing Decree 1971.

⁴ See also Decision of 25 March 1996, no. VB96/850, V-N 1996, p. 1405 and Bvr.2.3.14.e.c2

⁵ Hof 's-Hertogenbosch June 4, 2010, ECLI:NL:GHSHE:2010:BN3980