Cross-border property is usually assembled by two sets of hands. One builds the structure: the acquisition vehicle, the holding chain, the financing agreements and the tax analysis that supports them. The other runs the asset: leases, capital expenditure, service charges, tenant negotiations, eventual repositioning. The two frequently never meet. The structuring adviser signs off at completion and moves on; the asset manager inherits an ownership chain whose logic nobody explained and whose constraints surface only when something has to change. Much of the value lost in European real estate, and more of the risk created, sits in that gap.
Where the structure stops being paperwork
The gap is easy to underestimate, since a structure looks inert: a chart with boxes, produced once and filed. In practice it is a standing set of constraints on how the building can be operated. If the security package requires lender consent above a capital expenditure threshold, the letting strategy is not free. If cash is swept to service debt above the property company, the asset does not fund its own works. If the entity holding legal title did not sign the management agreement, every operational contract has to be checked before anyone can vary a lease. This becomes a problem when nobody operating the asset knows why the chart looks the way it does, and nobody from the structuring side is still in the room when the asset asks for something the chart did not anticipate.
A structure is not a document delivered at completion. It is the set of constraints the asset has to live inside for the whole of the hold period, and somebody has to remember why each one is there.
Vehicle and jurisdiction: the decision that fixes everything after it
The first decision is also the least reversible. Real estate income and gains are, as a matter of near-universal treaty practice, taxable where the building stands. No holding jurisdiction changes that. The allocation is written into the treaties themselves rather than inferred from them: in the Netherlands treaty with Germany, the article on income from immovable property gives the state where the property lies the right to tax income a resident of the other state derives from it, and the capital gains article in the same treaty gives that state the right to tax the gain on its disposal. What the holding jurisdiction does determine is everything above the property company: how profits are repatriated, where the financing is placed, how the eventual sale is taxed at shareholder level, and how a co-investor or a lender can be admitted without touching the asset itself.
One route often reached for at this stage has closed, and older structuring memoranda have not caught up. The fiscale beleggingsinstelling of article 28 of the Wet op de vennootschapsbelasting 1969 was for decades a familiar wrapper for property portfolios. Since 1 January 2025 the condition list in that article opens by requiring that the body does not invest in Dutch immovable property at all, and the prohibition reaches beyond direct ownership: a debt claim on a body that holds Dutch immovable property is caught as well, where the return on that claim is, in law or in fact, mainly connected with income from that property. The regime survives for other assets, but as a route into Dutch real estate it no longer exists, and any note that presents it as one should be read against its date.
Within that constraint the live question is whether to buy the building or the company that owns it. An asset purchase generally gives a clean start, a stepped-up base for local depreciation and no inherited history. A share purchase inherits the seller’s tax base, disputes, contracts and compliance record, and the transfer tax saving that is supposed to pay for all of that is more assumption than rule. Article 4 of the Wet op belastingen van rechtsverkeer treats shares as immovable property in their own right where the company’s assets consist largely of property at the time of the acquisition or at any time in the preceding year, where at least 30 per cent of them is property situated in the Netherlands, and where that property as a whole serves the acquisition, disposal or exploitation of property. The backward look over the preceding year matters as much as the test itself, because a company tidied up shortly before signing is caught anyway. What does not follow, and is often assumed to, is that the charge then lands on every buyer. Article 4(3) levies tax on an acquisition of shares only once the acquirer crosses a threshold, counting the shares he already holds and those still to come under the same or a connected agreement. A legal person is caught at one third of the interest, taken together with connected bodies and connected individuals. A natural person is caught at one third counted together with his spouse, his relatives in the direct line and in the second degree of the collateral line and any connected body, and then only if he also holds more than seven per cent together with his spouse. A minority co-investor below those thresholds takes his shares without the charge, which is precisely why the question has to be settled before he is admitted rather than after. The choice is rarely free: sellers prefer share deals for exactly the reason buyers resist them, and the price gap between the two routes is where the structuring conversation and the underwriting conversation have to become one conversation.
The rate matters more this year than last, because it has just been restructured. The general rate in article 14 of the same act is 10.4 per cent. Since 1 January 2026 a band of 8 per cent applies to the acquisition of a dwelling, and to article 4 shares and membership rights to the extent they relate directly or indirectly to a dwelling; through 2025 that band did not exist and a dwelling acquired other than as a main residence simply took the general rate. The 2 per cent rate is now the narrow case, reserved for a natural person who acquires a dwelling he will use as his main residence other than temporarily and declares that clearly, firmly and without reservation in a written statement made before the acquisition under article 15a, with two further cases of no relevance to a commercial deal, a value increase under article 9(8) and a housing cooperative acquiring from an approved institution. Article 14(8) carries a further rate of 4 per cent, and it belongs to precisely the transaction discussed here rather than to any reorganisation. Where article 4(1)(a) shares are acquired in a company holding newly built property, the relief that stops transfer tax and VAT from running together on the same acquisition, in article 15(1)(a) and article 15(6), is switched off by article 15(11) to the extent that property is used for at least two years after its acquisition for activities carrying less than a nearly full right of deduction. The rate on that acquisition is then 4 per cent and not 10.4, so a share deal in new property destined for exempt or partly exempt use is over-provisioned by a wide margin if the general rate is simply assumed. Two further points bite on a structured transaction. Article 14(6) withholds the 2 per cent from the acquisition of article 4(1)(a) shares altogether, so shares never reach the lowest rate whatever the property is. And commercial property, with the shares that stand in for it, sits at 10.4 per cent. A model built on the pre-2026 structure will misprice a residential portfolio.
Financing, and whether the interest actually deducts
Leverage is where the two worlds collide most expensively, because interest is only useful where the taxable income arises. Interest booked in a holding company above a foreign property company does little if the rental profit is taxed in the country of the building and the deduction sits elsewhere, unusable. The debt has to reach the level that generates the income, and pushing it down engages a second set of rules.
Those rules operate in layers. Pricing must be defensible on arm’s length terms, both the rate and the quantum, which in the Netherlands is a statutory standard rather than a practice: article 8b of the Wet op de vennootschapsbelasting 1969 determines the profit of related bodies as though the conditions independent parties would have agreed had been agreed. Earnings stripping regimes then cap net interest by reference to a measure of operating profit, with thresholds and group ratio tests that behave very differently for a single asset than for a portfolio. The Dutch version, in article 15b of the same act, denies the deduction of the net interest balance to the extent it exceeds the higher of 24.5 per cent of a corrected profit figure and one million euro, which on a single leveraged building is a live constraint rather than a theoretical one. Anti-hybrid and anti-abuse provisions test whether the lender is taxed on the receipt and whether the arrangement has a purpose beyond the deduction, the Dutch hybrid mismatch rules occupying articles 12aa to 12ag, and local rules add their own restrictions on top. Gearing therefore cannot be set by the credit market alone: the maximum available leverage and the maximum useful leverage are different numbers, and only the second belongs in the model. The interaction of the caps is set out in our note on interest deduction limits under ATAD.
Who signs, and what that does to the ring fence
Once the boxes exist, someone has to act through them, and this is where operational reality most often departs from the chart. Property management agreements, letting mandates, construction contracts, utility supply, insurance: each has a correct counterparty, and each one signed by the wrong entity weakens the separation the structure was built for.
Two consequences follow. The first is liability: a ring fence exists so that a problem at one asset does not reach the others, and it fails quietly if a single entity has been contracting for several. The second is residence and permanent establishment. If the decisions that matter are taken by people who are not the directors, in a place that is not where the company is said to be managed, the residence position is exposed whatever the register says, because article 4 of the Algemene wet inzake rijksbelastingen decides where a body is established according to the circumstances rather than according to any filing. Boards need real authority, real information and real meetings; delegated powers need to be written down and their limits observed. That is a governance question, not a filing question.
VAT on the way in, and the cost that never comes back
VAT is discovered late, because it looks like a timing matter and sometimes is not. Two questions decide it. First, the treatment of the property: whether the transfer falls inside or outside the VAT system, whether an option to tax is available and has been validly exercised, and whether the transaction qualifies as the transfer of a going concern. In the Netherlands all three sit within two provisions. Article 11 of the Wet op de omzetbelasting 1968 exempts the supply of immovable property, carving out the supply of a building before or within two years of first occupation and the supply of building land, and offering an option to tax the rest that is available only where the buyer has a full or nearly full right of deduction and only where the parties have chosen it in the notarial deed of transfer or by joint request to the inspector. Article 37d of the same act then provides that on the transfer of all or part of a totality of assets no supply is deemed to take place and the transferee steps into the transferor’s position, which is a different question from the option and answered separately. Second, and quite separately again, the recovery position of the acquiring group on its own transaction costs.
The second question is where holding structures get caught. Acquisition costs on a substantial transaction are themselves substantial, and the VAT on them is recoverable only where the entity incurring them carries on an economic activity with a right to deduct. A company that does nothing but hold shares generally sits outside that, not because any Dutch provision says so but because the settled case law of the Court of Justice treats the mere acquisition and holding of shares as falling short of an economic activity; a company supplying management services to its subsidiaries on proper terms generally sits inside it, provided the arrangement is genuine, documented and priced. Deciding after completion which entity ought to have engaged the advisers is not a decision but a repair, and usually an incomplete one. Once the building is held, the adjustment mechanism keeps the question open for a decade rather than a year, since article 13 of the Uitvoeringsbeschikking omzetbelasting 1968 revises the deduction on immovable property in each of the nine financial years following the year in which the entrepreneur began to use it, a tenth of the input tax at a time. The operating team therefore has to understand that a change in use carries a tax consequence long after the deal team has gone.
The exit, and the limits of the participation exemption
Structures are built for the sale, and the sale is where the assumption most often fails. A Dutch holding company disposing of shares in a qualifying subsidiary can, where the conditions are met, realize the gain without further corporate tax under the participation exemption, which is article 13 of the Wet op de vennootschapsbelasting 1969 and which leaves out of account both the benefits from a participation and the costs of acquiring or disposing of it, a participation requiring in the ordinary case a holding of at least 5 per cent of the nominal paid-up capital. That is a real benefit at holding level, and the reason the layer exists. It applies to the shareholding and not to the building underneath it, and it is not a shield against tax in the country where that building stands.
Many jurisdictions tax the indirect transfer of real estate through rules that look through the company where its assets are predominantly property, and many charge transfer tax on the acquisition of shares in such a company. The treaties do the same thing at their own level: the OECD Model Tax Convention allows the situs state to tax, without limitation, gains on shares or comparable interests that derived more than 50 per cent of their value, directly or indirectly, from immovable property there at any time during the 365 days preceding the alienation, and individual treaties move the line. The Netherlands treaty with Germany sets the threshold at 75 per cent on that same look back over the 365 days before the disposal, takes out shares traded on a recognised stock exchange and property in which the company or the holders carry on their own business, and returns the gain to the residence state where the seller held less than 50 per cent before the first disposal or where the gain arises from a business reorganisation, merger, division or similar transaction. The exemption can therefore apply perfectly at one level while the gain is taxed at another, and the buyer may face a charge that changes his price. That look back is the detail to carry into the exit analysis, because it is aimed squarely at the obvious response to it. Selling down the property, or loading the company with other assets, in the months before a disposal does not move the gain out of the situs state: the test is applied to the worst day of the preceding year, not to the day of completion. The analysis therefore has to be run at both levels, under the treaty that will actually govern the sale, and against the structure as it stands across the whole year before completion rather than only as it is built on day one or arranged on the morning of the exit.
A hypothetical worked comparison
The arithmetic below is illustrative only. The figures are round and invented, and show the mechanics rather than any transaction, market or actual rate. Assume a building agreed at 100, sitting inside a company whose tax base in it is 60 because the seller has held and depreciated it for some years. Assume, purely for illustration, a transfer tax of 10 per cent on an asset purchase and a corporate tax rate of 25 per cent. Both assumptions are rounded for legibility rather than taken from the statute: Dutch commercial property is at 10.4 per cent under article 14 of the Wet op belastingen van rechtsverkeer, and article 22 of the Wet op de vennootschapsbelasting 1969 sets corporate tax at 19 per cent on the first 200,000 euro of the taxable amount and 25.8 per cent above it, so a real model uses the real figures and the country’s own.
On an asset purchase the buyer pays 100 plus 10 of transfer tax, so 110 of cash out, and what he gets for it is a depreciable base of 100 and a company inheriting no history and no legacy claims. On a share purchase he avoids the 10, assuming no transfer tax arises at share level, but takes over the seller’s base of 60 in its place, and that substitution carries the rest with it: the 40 of latent gain will be taxed at some point, worth 10 at the assumed rate, he loses depreciation on 40 of value across the hold, and he inherits everything else in the company as well. That assumption about the share level is the one to test first rather than last, since on Dutch property it commonly fails.
On these hypothetical numbers the two routes are close in headline terms, and the outcome turns on three things the headline does not show: how the latent tax is shared in the price, whether the buyer’s own exit will be a share sale that passes the same discount to the next buyer, and what the inherited history is worth as a risk. A discount of the full 10 makes the share deal cheaper for the buyer and unattractive to the seller; no discount at all reverses that. Where the parties land can only be negotiated by someone holding both halves of the analysis at once.
One roof
The case for keeping structuring and asset management under a single roof is not that either discipline is hard in isolation. It is that the decisions described above are joint decisions, taken once, with consequences that run for the entire hold period and land on whoever is still there at the end. The vehicle constrains the financing; the financing constrains the capital expenditure; the contracting entity constrains the liability; the VAT position constrains which companies should exist at all; and the exit tests all of it at once. Where an activity is regulated, it is carried out by separately licensed parties rather than by the structuring or operating team. Teams that hand the file over at completion are not doing anything wrong. They are simply not the ones who find out.
Montclare works as an operating partner and structuring counterparty on European real estate and asset platforms. Our approach is set out on our asset management page.
This article is informational. It does not constitute investment advice, an offer, or an invitation to invest, and it is not a financial promotion. Regulated activities are carried out only by appropriately licensed parties.