Per 1 January 2023, the Dutch RETT (real estate transfer tax) will increase from 8% to 10.4%. Transactions that close after 31 December 2022 will therefore be subject to a 2.4% higher transfer tax.
It may be possible to avoid this by applying a Provisional Closing Scheme (Groninger akte structuur). This essentially means that the formal closing for tax purposes takes place this year, but the purchase price is paid at a later stage, next year, after certain conditions subsequent have been fulfilled, such as financing.
The Provisional Closing Scheme entails that the transfer of ownership takes place provisionally. The ownership passes to the buyer, but the purchase price remains unpaid. Only the RETT is to be paid to the tax authorities.
The parties furthermore agree on a long stop date for payment of the purchase price (generally depending on financing arrangements). If, at the long stop date, the purchase price is not paid, the purchase agreement is dissolved by force of law. Therefore, no retro-transfer via a civil-law notary is required to effectuate this. Non-fulfillment of the condition subsequent (payment of the purchase price) automatically leads to the legal ownership shifting back to the seller.
Moreover, all rights in rem (such as mortgages, liens, pledges, etc.) vested in the interim period become null and void as well. So, the seller does not run the risk of receiving an asset encumbered with rights vested when ownership was with the buyer. When the legal ownership shifts back to seller, no RETT is due.
If the condition subsequent (payment of the purchase price) is not fulfilled, and ownership shifts back to the seller, the buyer is entitled to reclaim the RETT paid from the tax authorities. The Provisional Closing Scheme does not only apply to the current increase of RETT. The scheme is also a useful solution in various other situations where there is a tax deadline that cannot be met because certain conditions subsequent are still pending.