In case of a purchase and transfer of a right of ground rent whereby the ground rent has not been bought out perpetual, there is a lot of discussion about how to capitalize the value of this ground rent.
When you acquire a right of ground rent, the purchase price must be increased by the capitalised value of the ground rent for the calculation of the tax base for the real estate transfer tax. This is the case when the ground rent has not been bought out perpetual, but for a certain period. There is a lot of discussion about how this value should be calculated. It is clear that as basis of the calculation the year rent must be taken at the time the redemption of the ground rent takes place. The discussion is about the indexation of this ground rent, in which different points of view occur, as follows:
- no indexation is required;
- indexation takes place until the date of transfer of the ground rent;
- indexation takes place for the entire period that the ground rent has been bought off.
In Amsterdam there has been consultation with the Dutch tax authorities, and their opinion is that option 3 should be implemented. However, the calculation of this indexation is complex. The indexation up to the date of transfer (option 2) is relatively straightforward. However, the indexation of the remaining period is a “black box”. The Dutch tax authority in Amsterdam stipulates that the indexation is based on average 2% in recent years and that this 2% should be applied to the follow-up indexation.
However, our experience is that in other parts of the country option 1 is often applied, and this leads to major differences. So, it does make a difference where the relevant deed is executed and which tax authority is competent.
The abovementioned results in an inequality that is unacceptable in our opinion. To be continued. In a next blog we will try to explain the system of this redemption and also the philosophy of it.