Budget Day 2024: the VAT and transfer tax plans of the Schoof government

An adjustment scheme for investment services, the rise from 9% to 21% for accommodation and culture, and a new 8% transfer tax rate for buy-to-let homes. We take you through the plans.

The Schoof government has published its tax plans. All of these measures are subject to the caveat that they are proposals which only take effect once both chambers of parliament have approved them.

VAT adjustment for investment services

A public consultation on the 2024 year-end regulations opened on 5 September, including an implementation of the adjustment scheme for investment services relating to immovable property. In short, the measure means that deduction on services of a lasting character relating to immovable property is tracked for five years and must be corrected where the use giving a right to deduct changes. Under current rules that deduction is final in the financial year of first use, so deferring non-deductible use can produce a substantial advantage.

Tax Plan 2025 contains only a statutory definition of an investment service. The detailed implementation is still under consultation and will follow at the end of this year in the year-end regulations. It is a somewhat curious sequence: the definition is already in the Tax Plan while a consultation on the scheme itself is still running.

In our view the proposed definition is too broad, because it also covers work to keep property in good condition, such as maintenance and repair. The recent Drebers judgment also shows that always applying a five-year period may conflict with EU law. Where renovation work is so extensive that its economic characteristics are, in terms of durability, essentially equivalent to acquiring a new property, the ten-year period must apply.

Accommodation and culture from 9% to 21%

The coalition agreement provides for abolishing the reduced rate from 1 January 2026 for:

• the provision of accommodation, such as short-term letting of hotel rooms, furnished holiday homes or static caravans, other than providing camping facilities
• cultural goods and services: art, lending digital and printed books, newspapers and magazines, providing opportunities to take part in sport and to bathe in a sports facility, admission to museums, music and theatre performances, admission to sporting events and demonstrations, and performances by artists. Cinemas and day recreation such as zoos and theme parks are excluded.

The increase is expected to raise more than € 2 billion. For individuals and for businesses and institutions that cannot deduct, these goods and services will in all likelihood become considerably more expensive. The government's programme provides that school boards in primary, secondary and senior secondary vocational education will be compensated for the increase on teaching materials.

To prevent a purchase in 2025 for a supply in 2026 producing a rate advantage, it is provided that what matters is when the supply is made. Selling a ticket for a concert in 2026 is therefore subject to 21% VAT, even if the ticket is sold in 2025.

The government has carried out no impact assessment, and State Secretary Idsinga has told parliament there will not be one. In our view that is unwise. Research by ABN AMRO into the impact on the accommodation sector suggests the government is overestimating the revenue and has not allowed for foreseeable shortfalls. It would be desirable for the government to commission an impact assessment after all, if necessary under pressure from parliament. Nor has any objective justification been given for retaining the reduced rate for campsites, cinemas and day recreation. That choice appears to rest on populist considerations alone.

8% transfer tax for buy-to-let homes

The general transfer tax rate of 10.4% is to be reduced to 8% for acquisitions of homes by investors, to make investing in private, mid-market and free-sector rental more attractive. The rate takes effect on 1 January 2026. The measure is not yet in Tax Plan 2025 but is being worked up and will go to parliament before 21 October.

From 2026 there will therefore be four rates: the general rate of 10.4%, the new 8% rate for buy-to-let homes, the 4% rate in force since 1 January 2025 for certain property share transactions, and the 2% rate for owner-occupied homes. On top of that there is the first-time buyer exemption.

Yet another rate makes transfer tax more complex than it already is, while in our view it is highly doubtful whether this reduction will persuade investors. Supply is tight and prices are correspondingly high, while investors also face regulation that caps rents and makes it hard to part company with bad tenants. To make the housing market more attractive it would be wiser not simply to turn a rate dial, but to take a broader and above all durable approach to the obstacles in the Dutch housing market.

Other measures

The 2025 miscellaneous tax bill proposes that handing over the keys before legal transfer should not count as a taxable economic acquisition. It also proposes extending the first-time buyer exemption to the acquisition of economic ownership, and extending the exemption for buying back homes under conditional sale arrangements to cover their appurtenances. Tax Plan 2025 also narrows the land consolidation exemption by excluding homes and other structures not used for agricultural purposes.