Controversial real estate owner Blackstone uses common trick to avoid Dutch taxes: Report
The American private equity firm and investment company Blackstone, which buys up properties on a large scale in the Netherlands, has been avoiding paying taxes through a tax structure that shows them suffering a loss on paper. Dutch tax authorities have been missing out on millions in corporate tax due to the tax structure, an investigation by the Volkskrant showed.
Blackstone began buying up apartments in the Netherlands two years ago, particularly in Amsterdam, Rotterdam and Utrecht. To date, Blackstone owns around 1,700 apartments in the Netherlands. Annual accounts from Blackstone’s balance sheet last year showed that Blackstone has around 793 million euros worth in properties in the Netherlands.
The properties are owned by Dutch holding companies which in turn are part of companies in Luxembourg, the Cayman Islands and Jersey. In these areas, the tax rate is very low. The Dutch holding companies do not have to pay any taxes in the Netherlands because on paper, they do not make any profit.
The Dutch companies show a loss due to interest charges on debts they have with their foreign partnerships. The interest expenses can be deducted from the rental income in the Netherlands, therefore, relieving the Dutch companies from having to pay taxes.
The payments are structured in such a way so that the interest charged to the Dutch companies is not immediately paid off, the Volkskrant reported based on a review of company documents. Thus, debt will remain on paper at the end of every fiscal year for the purpose of Dutch annual reporting, with little or no profit that can be taxed.
Blackstone stated first to the Volkskrant, and later by email to NL Times, that the investment company follows Dutch law. “The structures we use are in line with other institutional investors across the world.”
Blackstone owns around 550 billion euros in assets globally which the company invests in sectors including, housing data centers, medical equipment, bans, film studios and casino hotels. A company spokesperson told NL Times it invested 4 billion euros in private and commercial real estate in the Netherlands over the past five years alone. It also employs 3,200 people in the Netherlands.
The investment company has come under fire in the past for allegedly keeping more than 330 apartments in Amsterdam vacant while there is a housing shortage in the Netherlands, however the investment firm said that a majority of the homes were being renovated. “The actual situation is that over 99% of the vacant homes are under maintenance or in the planning stage thereof. The majority of the approximately 330 vacant homes were purchased last year. Most were already vacant and in poor condition," Blackstone said earlier this month.
