1.               Key issues identified relating to the new Dutch foreign entity qualification rules

In response to the motion submitted by MP Van Eijk, the Dutch Ministry of Finance has completed an initial investigation into tax and legal challenges surrounding the new Dutch entity classification rules for Dutch and foreign entities that are comparable to a Dutch Fonds voor Gemene Rekening (“FGR”).

The revised FGR rules aims to prevent unintended tax benefits and qualification mismatches in cross-border structures. Based on input from the internet consultation late 2024 and a roundtable session held in April 2025, three key issues have been identified:

2.               Qualification of (foreign) partnerships as FGR

With the removal of the former “consent requirement” (which determined transparency of limited partnerships), some partnerships—particularly Dutch CVs and similar foreign entities—can now qualify as FGR.

While this simplifies alignment with international standards, it reintroduces hybrid mismatches between Dutch and foreign tax treatment. Moreover, enforcement becomes complex if the tax burden shifts from the entity to individual investors.

2.1             What’s being considered?

The Ministry is exploring differentiated treatment for partnerships based on risk level—e.g., allowing transparency for low-risk CVs while preserving taxability for funds with Dutch real estate and many participants. Legislative change is likely needed.

3.               Reference to financial supervision Act (“Wft”) Definitions

The updated FGR definition now links to Wft terms, such as, ‘investment fund’ and ‘UCITS’. However, it was expressed that this requires in-depth financial regulatory knowledge, which many taxpayers and tax advisors lack.

The complexity increases when assessing foreign entities, where domestic financial supervision standards may differ—or may not even apply to certain structures. This has led to legal uncertainty.

3.1             What’s being considered?

The Ministry will investigate revising the new rules to refer to terms used in the Wft, and exploring recognition of foreign funds based on registration with equivalent regulators in other jurisdictions.

4.               The ‘passive investment activities’ criterion

The FGR must engage in ‘passive investment activities’. However, what qualifies as “passive” differs between fiscal law and financial regulation. For instance, PE or VC may qualify as passive under the Wft but not under Dutch tax law, where it’s often viewed as business activity.

4.1             What’s being considered?

The Ministry maintains the stricter fiscal interpretation. Whether a fund is engaged in passive investment activities should be analysed on a case-by-case basis. Aligning with the Wft would undesirably broaden the scope of FGR and potentially reintroduce tax mismatches.

5.               Next Steps

The Ministry will continue exploring legislative solutions for issues 1 and 2. A draft legislative proposal is planned for public consultation in autumn 2025, with earliest enactment expected per 1 January 2027. Special attention will be given to transitional measures to avoid short-term tax consequences or compliance burdens.

This reform is relevant for fund managers, family offices, tax practitioners, and cross-border investors involved in Dutch fund structures or real estate holdings. Further updates will follow as the consultation progresses.

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