US Citizen Buying Property in The Netherlands
The key factors a US citizen must know about buying property in the Netherlands include details related to foreigner property regulations, transfer payments and valuation taxes, fees for contracts and agencies, and translator and notary services. Full details about buying property in the Netherlands are included below.
Regulations and Real Estate
- The Netherlands has no restrictions on foreigners when it comes to buying a property.
- Foreigners can buy property in the Netherlands, whether they are residents or not. That means a person can buy property without having or needing permanent residence.
- The real estate panorama of the Netherlands has its ins and outs. It is advisable to buy property if, and only if, the person will live there for more than three years. This is recommended because the final price of a property can go up to 6% more than the original price.
- Due to the 2008 financial crisis, property prices fell significantly. However, prices have been rising since 2018 and people tend to buy properties without waiting too long because they never know when property prices can increase further.
- Besides that, according to the last census in the Netherlands, which was in 2017, 69% of people own a house. In other words, the competition for buying properties in certain areas is intense.
- US citizens need to mandatory hire a translator the day they sign the contract. Even if a US citizen speaks dutch perfectly. The average price is $300-$400.
- The person must deal with a makelaars, which are dutch real estate agents. This can be a disadvantage because of the fees.
- It is not common that Dutch banks offer a full mortgage to someone without a permanent residence. It's more usual they offer only half.
Benefits of Buying Property in the Netherlands
- If someone buys property in the Netherlands with a full or partial mortgage, and the property is where the person resides, automatically it's tax-deductible. Please note: If the owner of the property is not living in the Netherlands, then s/he doesn't qualify for tax-deductible payments. In those cases, the person must rent the property with a price that covers the mortgage.
- In the long term, it is cheaper to buy a property than rent it because prices are increasing every day. In other words, someone may buy a house today and rent it some months later and get paid for that.
How Property Taxes Work in the Netherlands
- Renters don't pay the same taxes as someone who buys property. The former only pays water tax, maintenance of sewage, and collection of garbage. With that said, these are the taxes to pay for buying a property in the Netherlands:
- Transfer Tax: the person who buys the property must pay 2% of the final price. Example: If the property price is EUR 200,000, the person must pay EUR 12,000 on transfer taxes.
- Property Tax: In a few words, someone must pay this tax to own a property. The price will depend on the area the person chose, but the average is 0.05% and 0.3%, being 0.02% the most likely.
- Pre-Sale Agreement Deposit: The seller or the agent may ask for this to know if the person will buy the property. Generally, they ask for 10% of the price.
- Mortgage Arrangement Cost: Average is 1%-1.2% of the purchase price.
- Mortgage Contract: The fee for the contract is 0.15%, though, it is tax-deductible as long as it's your main home.
- Real Estate Agent: If, and only if, you paid for real estate agent services, they will charge 2% of the price.
- Deemed Rental Value: That's a fee imposed by the government and only applies if you are going to rent the property. Then you must pay 0% or 0.7% of the property value.
Difference Between Buying as a US Citizen Vs Buying Into a US Trust
- The difference between buying a property as a US citizen versus buying into a trust is time and papers. The process to buy property in the Netherlands can be described as tedious, because it has several requirements, but when compared to buying into a trust, it is easier.
- In the Netherlands, there is not a legal concept for trust, though, it is recognized. In the Netherlands, trust is known as "economic ownership", and it allows legal partnerships and beneficial interests to be separated.
- First, both foreigners and citizens can buy into trust. Second, to buy into a trust, the person has to draft and notarize an agreement with a trustee. A trustee is found in trust companies in the Netherlands, they also help to create investment funds.
- Buying property into a US trust requires more paperwork than just buying as a US citizen. Besides, it implies spending more money on trust companies.
Can a Property Be Rented Out by a US Citizen When They Aren't Living There?
- Yes, a US citizen can rent a property while they're not there. However, once the person does not live there anymore, s/he will not benefit from tax-deductible payments so, the rent must cover the mortgage payment.
Tax Consideration if the Person Sells the Property Later
- All the profit made from a property in the Netherlands it tax-deductible. That means if a person decides to sell her/his property s/he won't pay taxes. The only fee s/he will pay is the agency's fee (if used).
Summary of Steps to Buying Property in the Netherlands
1. Hire an agent (despite that it's optional, it's highly recommended).
2. Find the right mortgage, for this, the person must go to a bank.
3. Also, hire the translator and the notary.
4. Seller and buyer sign the contract.
5. The notary registers the contract.
We began the research looking for information in solid and trusted web portals. Once we found an overview of what it was like buying property in the Netherland as a US citizen, we compared the information in several sources until finding the ones that coincided. To answer the question related to the difference between buying as a US citizen versus buying into a US trust, we had to analyze the information since it is a very specific question not available on the Internet. However, with the definition of trust, the process to create one in the Netherlands, and the process to buy property there we were able to identify the difference: time and paperwork. To wrap it up, buying property as a US citizen without permanent residence in the Netherlands, is a process that requires time and money, though, it is not difficult.