Tax law changes

Buying a house in Holland

Tax law changes

There have been some changes in the rules and regulations and in the tax laws with regards to house purchase and mortgages so it is as well to review these.

As mentioned in an earlier article, in September 2003 the law changed with regards to when an offer to buy becomes binding on the purchaser. It used to be binding from the moment a verbal agreement was reached. It is still binding on the vendor from that moment and – by law – the vendor must take the property off the market as soon as an agreement has been reached. The good news is, therefore, as the purchaser, you cannot be gazumped!

Nowadays, however, the agreement only becomes binding on the purchaser once the written agreement has been signed. And even then you still have 3 working days cooling off period.

Tax relief is granted on the interest paid on a mortgage of the home you actually occupy. If you buy to rent you cannot claim the tax relief on the property.

Tax relief can only be claimed on the portion of the mortgage used to purchase the property or to improve the value of the property. Thus, if you included money to buy furniture in your mortgage then the interest on this portion of the mortgage is not tax deductible.

If you sell one property – at a profit – the profit made must either be invested in the new property or (if you decide to invest the profit elsewhere and still take a full mortgage on your new property) the profit must be deducted from the new mortgage to determine the amount of tax relief you can claim.


What insurances do you require in connection with a mortgage?

Life Assurance (risico).

We believe that this should be optional and we do know 2 institutions that do not insist on it. However many lenders will insist that the person actually financing the mortgage is insured for the difference between the foreclosure value of the property and the actual mortgage. This policy is then assigned to the lender - to protect them not you!

Couples would be well advised to ensure that the partner who is financing the mortgage is indeed insured for the mortgage but – as I say – this should be your choice and should take into account any life assurance you already have. Also be careful with Dutch life assurance policies. Many cease to be valid when you leave the country permanently!

Building Insurance (opstal).

This is compulsory. One of the values that the assayer should give you is the re-building value (herbouwwaarde). This is the likely cost of rebuilding the whole property if it is destroyed by storm or fire. If you are buying an apartment and paying a service charge this insurance is almost certainly included in the service charge.

Contents (Inboedel).

Optional but advisable. Premiums vary tremendously from region to region in The Netherlands. They are higher in the big cities and lower in the countryside.

Public Liability (aanspraaklijkheid).

Actually, this has nothing to do with owning a property but is a legal requirement.

Legal Aid (Rechtsbijstand)

Optional but advisable. Most insurers offer all of the above as a package and usually the more elements you buy the cheaper the package becomes. So if you already have one of the elements check with your provider about adding the others to your existing policy.

Peter Gibney is a consultant with Strategies based in Dordrecht. Strategies are a fully licensed insurance broker/financial advisor specialising in the expatriate market. Any questions arising from this series of articles or other none related matters may be directed to Peter on {phone} 078 844 0879 or {fax} 084 751 2944 or {e-mail}

This article has been submitted by Peter Gibney

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