Our Tax Services focuses on valuations for tax reporting of real estate transfer tax, property tax and transfer pricing.
Real Estate Transfer Tax
Various interests can play a role in real estate transfer tax. For example, the sale of a business or a transfer of real estate within the company group is of the utmost importance for the correct value determination. In case of a sale of a building in which both commercial real estate is situated as well as residential properties, a correct distribution of value has a major influence on the amount of the real estate transfer tax to be paid. In short, a thorough investigation into the underlying aspects of a transaction is an important part of a valuation process.
For more information, see also our Real Estate Advisory
The value of real estate is in many cases the basis for the payment of property tax. This local taxation – in the Netherlands – is part of the operating costs of real estate. It is also normative for the degree of tax depreciation on the property. For example, property in own use in the Netherlands may be depreciated up to 50% of the property tax value. It is therefore important for various reasons that this value has been determined correctly. Our appraisers can assist you with an assessment of this value or can support you with the objection and appeal procedures.
The Valuation Company can assist you in all tax related questions that may arise during pre- and post-transaction or annual Real Property transfer tax determination.
If two unrelated companies are subjected to a trade, the transfer will be according to market price at “arms-length”, e.g. Fair Value. Fair Value is usually considered to be acceptable for tax purposes as well.
However, when two companies are related, part of the same company group, and trade (assets) internally, the transfer price can be manipulated to minimize the overall tax commitment. This can be a transfer of a single machine, or a full production line. Although intercompany transactions or transfers are eliminated when consolidating the financial results of controlled foreign corporations and their domestic parents, for tax purposes such entities are not consolidated. Transfer pricing is not in itself illegal or necessarily abusive. What is illegal or abusive is transfer mispricing, when the price is being manipulated to ensure the highest gain for the company. Tax authorities are increasingly focused on the pricing used and the transfer pricing policies implemented by multinational companies.
To prevent penalties from authorities, it is important to implement a good transfer pricing strategy and to have sufficient transfer pricing documentation. Authorities and accountants often require an independent valuation service provider for the right support in transfer pricing matters.
The Valuation Company can offer independent and un-biased valuation services and proper documentation of the tangible assets being transferred.