In our update dated 24 September 2025, we explained the temporary transitional rules for Dutch FGRs (and comparable foreign entities) designed to help avoid unintended Dutch tax exposure in 2025 and 2026. On 17 October, the Dutch State Secretary of Finance answered questions that were raised in the context of the new transitional regime. These answers are highly relevant for the Dutch fund practice.

Q1. What is the policy intention behind the temporary regime?

A: It is a time-limited safety net aimed at preventing short-term Dutch tax exposure while the government develops a revised FGR definition. The regime is not intended to be permanent. The State Secretary reiterated the commitment that, if an amendment of the FGR definition proves feasible, a draft legislative proposal will be published for public consultation later this year.

Q2. Who can rely on the additional transitional measure?

A: The measure applies to Dutch partnerships that already existed before 1 January 2025 and were tax-transparent immediately prior to that date, but would become tax-opaque from 2025 under the new FGR rules. Partnerships incorporated on or after 1 January 2025 cannot rely on the additional transitional rules. Partnerships established after 1 January 2025 can only safeguard tax-transparency by including a redemption-only mechanism in the fund documentation, meaning that participations can only be transferred to the partnership itself.

Q3. Can foreign entities also rely on the additional transitional measure?

A: A foreign entity comparable to an FGR may also rely on the additional transitional measure, for instance, where it has Dutch-source income or would be considered a foreign taxpayer (i.e., tax-opaque) if it had such income. The latter means that foreign FGR-type entities can apply the measure even without Dutch-source income. This is particularly relevant in cross-border structures, where, for instance, it must be assessed whether Dutch withholding tax could arise or whether the Dutch participation exemption remains applicable.

Q3. Do all investors need to consent to the opt-out?

A: The opt-out route (ensuring tax-transparency until the new FGR definition is introduced) requires explicit consent from all investors to whom the assets, liabilities and results over financial year 2025 are attributed. Consent from the general partner alone is insufficient.

Where interests in an entity qualifying as an FGR are held through another tax-transparent entity, consent must also be obtained from investors in that tax-transparent entity.

The formal deadline for obtaining consent remains 28 February 2026.

Q4. Is there an exception to the investor-consent requirement?

A: Dutch partnerships and foreign entities that had already implemented a redemption-only mechanism before 2025, or had formally recorded their intention to do so before that date, do not require separate investor consent.

If the FGR definition is not revised, Dutch partnerships and foreign entities that recorded their intention before 2025 must implement the redemption-only mechanism before the new FGR definition is effective (expected per 1 January 2027) to maintain tax-transparency.

We are in close contact with the Dutch tax authorities to discuss the detailed aspects of the developments mentioned above. We would be happy to assist, in particular by analysing whether the additional transitional rules can be applied to your structure and supporting you with their implementation.