Split transfer tax exemption as of 1 July 2025

The End of Year Decree 2024 includes the new division exemption in transfer tax. This exemption will take effect from 1 July 2025 and contains a number of new conditions and targets two types of demergers: demergers with companies and so-called quarrelsome demergers.

Below, we elaborate on the new regime and the changes compared to the current situation.According to the legislator, the current division exemption is used more broadly than intended. As a result, unwanted transfer tax is avoided.

The purpose of the division exemption is to prevent transfer tax from being an obstacle when choosing the most desirable structure of a company and to avoid taxation when optimally positioning real estate within a structure.

The new division exemption is more in line with other transfer tax exemptions. The link with corporate income tax for the interpretation of the term ‘business considerations’ has also been removed.

The current division regime in the transfer tax
The current demerger exemption, which has been linked to corporate tax and thus to EU law since 2006, leads to:

• a broader exemption than originally intended, allowing property sales via legal split-off without taxation;
  
• much discussion and implementation burden due to the complex anti-avoidance test and the concept of ‘avoidance or deferral of taxation’;
  
• a lack of consistency with other transfer tax facilities, such as legal mergers and internal reorganisations.

In view of the above, a proposal to amend the division exemption in transfer tax was published for consultation on 8 April 2024. Following the responses received, the final amendment to the scheme was published on 23 December 2024 in the End of Year Decree.

The new split exemption as of 1 July 2025
The new scheme has a number of stricter conditions than the current facility:

• the enterprise requirement: the property must be transferred as part of an enterprise;
  
• the continuation requirement: the business must be continued for at least three years;
  
• the similarity requirement: the shareholders must obtain a qualitatively and quantitatively equivalent interest; and
  
• the holding requirement: the acquired similar interest must be held for at least three years.

This significantly complicates reorganisation in the face of a sale (e.g. via legal split-off) without levying transfer tax.

At the same time, the new regulation provides a specific exemption for quarrelsome demergers where no enterprise requirement applies.

Key points of the new division exemption
The new exemption is decoupled from corporate tax and EU law. Objective conditions will be set so that clarity on application will be provided more quickly. The scheme distinguishes two types of demergers:

1. demergers with company:
   • real estate that is part of an enterprise is exempted, provided the enterprise requirement, continuation requirement and holding requirement are met;
     
   • investment property is excluded from the exemption; and
     
   • splits aimed at avoidance remain taxed.
     
2. quarrelsome demergers
   • pure demergers with no transfer of an enterprise are not subject to the enterprise requirement and continuation requirement; and
     
   • shareholders do have to acquire and maintain a similar interest for at least three years.

The new demerger exemption offers opportunities for:

• splitting holding companies into personal holdings without an enterprise requirement (e.g. in the case of shareholder disputes); and
  
• restructuring property companies, provided no material interest in the property shifts.

However, because the exemption is applied on a per-property basis and shifts in interest are taxed immediately, in practice, the scheme will often not fully exempt. For example, when shareholders with a shared property portfolio split up.

Conclusion
The new demerger exemption introduces stricter requirements for demergers with companies and offers limited scope for quarrelsome demergers. While the rule has some practical advantages, certain restructurings such as splitting real estate companies with multiple shareholders remain taxed due to the specific application per real estate. Organisations should carefully assess the impact of the new rules to determine whether and how to make the best use of the new split exemption. As such, the new division exemption is certainly not always more favourable than the current regime. In the situation where another legal demerger is planned in 2025, it is very important to consider which regime is best to apply.

Taxperience Family Business and Taxperience Real Estate
Above, we have briefly outlined what the new divisional transfer tax exemption regime entails. For this year in particular, the choice of whether to carry out a legal split before 1 July 2025, or after this date, may be relevant.

If you have any questions about this, please contact one of our advisers. We will be happy to think along with you.

This document was prepared on 4 February 2025