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Can I help my sister to buy a property in the Netherlands? What are the tax consequences?
My sister, age 58 years (a widow in receipt of a Dutch pension) lives in Holland in a rental apartment on which she has been paying rent. Recently she told us that she could purchase the property. We wish to help her to purchase it so that she can avoid having to pay rent. Will we have to pay tax ? Will her pension be reduced if she owns the property? What if I purchase the same property and register myself as the owner, do I have to pay tax? I live in Singapore and am a Singapore citizen.
You can help your sister to purchase the property. If you lend her the money the interest she pays will be deductible for her and income for you (taxable depending on the tax laws in Singapore). It is advisable to create a loan agreement so that it is clear what is arranged. If you give her the money gift duties will be applicable. This may also be the case if the interest you charge is (much) lower than the average market rate.
Her pension will not be reduced in our opinion.
If you buy the property you will pay tax on the property in the Netherlands based on the value of the property minus the outstanding debt to buy the property. Tax will be a certain percentage of the equity. In that case mortgage interest can’t be deducted. (see also: How is a second home in the Netherlands taxed? It is owned by a non-resident).
The same is applicable if you want to help your child, parent or other person to buy a property.