Publish Date

Sep 29, 2022

Abolishment Dutch REIT Regime: Looking Ahead

Industry Insights / Tax Insights

The exact impact of ATAD3 on private equity, real estate and infrastructure funds remains unclear due to the many moving parts within the EU’s ATAD3-proposal. One element is, however, already clear and that’s the continued importance of fund governance and the administering thereof. This publication describes how the importance of governance ties into the ATAD3-proposal and what practical items can already be considered by fund managers.


The funds industry is struggling with ATAD3. This is a result of the many moving parts within the ATAD3-proposal. Fund managers are, for example, closely monitoring whether the European Commission will accept the (draft) amendments proposed by the Committee on Economic and Monetary Affairs, such as deferral of the effective date to 1 January 2025, allowing ‘outsourcing’ to associated enterprises and broadening of the carve-out for AIFs to include subsidiaries. Industry associations have also requested the European Commission to relax the minimum substance requirements (e.g., allowing the same ‘premises’ to be used by different associated enterprises). Once the ATAD3-proposal is formally adopted, there is also the transposition into the domestic law of the EU Member States, possibly leading to a fragmented implementation. A great deal remains uncertain, which raises the question: what can fund managers already do to prepare for ATAD3?

In A&M’s view, the starting point at this time should be to critically (re-)assess the quality of fund governance. Despite the many moving parts, governance is a constant, even if ATAD3 is ultimately not adopted by the EU. The governance element is mainly visible in the rebuttal option of the ATAD3-proposal, but it’s also an important element in anti-abuse case law of the Court of Justice of the EU (e.g., the so-called ‘Danish Cases’) and the OECD’s place of effective management doctrine to determine tax residency. This case law and doctrine are actively applied by tax authorities throughout the EU when assessing an entity’s eligibility for withholding tax exemptions or reductions.

Based on case law from the Court of Justice of the EU, abuse is primarily tested by assessing whether an arrangement (e.g., an entity and/or financial arrangement) reflects economic reality. Under the OECD’s place of effective management doctrine, an entity is – shortly put – tax resident in the jurisdiction where key management and commercial decisions are taken. Through the ATAD3-proposal, it has become clear how the European Commission intends to assess these items. This will be done by requiring evidence to substantiate: (1) the commercial rationale behind the establishment of an entity and (2) that key decisions concerning the value generating activities are taken at the level of the entity and in the EU Member State where the entity resides for tax purposes. This should be further substantiated with employee profiles.

This demonstrates the importance of governing fund entities (e.g., holding, financing and property companies) in line with their commercial rationale and properly administering decisions. Especially in large cross-border structures and the speed at which certain decisions need to be made, the correct administering often proves to be a challenge.


Practical items to consider when (re-)assessing fund governance can include:

  • Board compositions and decision-making – Boards should consist of individuals with appropriate qualifications to take key management and commercial decisions and as such to control an entity’s business activities (e.g., portfolio or property investments and financing). The tax residency of individual directors should also be considered. Directors that are employed by the fund manager and/or hold various directorships should be mindful of where decisions are made and in what capacity decisions are taken. Board meeting protocols and business activity protocols can provide further guidance and support.
  • Board meeting protocols – Board meeting protocols generally include tax-related guidance concerning (physical) attendance, frequency, location, agenda, board packs, proxies, minutes, decision-making, authority of individual directors and document signing. These protocols often also include requirements that should be included in an entity’s articles of association upon establishment.
  • Business activity protocols – Business activity protocols typically provide further guidance regarding specific activities. It can, for example, cover practicalities concerning acquisitions, disposals, marketing, (re)development, (re)financing, distributions and so on. The strategic management and commercial decision-making should namely rest with the board and such authority should not de facto exercised by another party (e.g., an investment advisor). Business activity protocols also contain guidance and limitations with respect to delegation of authority agreements and the appointment and role of advisors.
  • Legal and financial administering – Depending on the business activities conducted by an entity, it should also be considered to properly allocate personnel and office expenses to such entity (e.g., through split employment contracts, on-charges and/or cost-sharing agreements) to ensure that the legal and financial arrangements align with the economic reality. Transfer pricing implications should be considered when doing so.

It is still unclear whether ATAD3 will be adopted and, if so, what the exact impact will be for fund structures. However, fund governance, actively applying or revisiting protocols and properly administering key decisions remains important. Given the two-year look-back period included in the ATAD3-proposal, this matter is possibly already relevant. A&M has best practices available and practical experience with reviewing and optimizing board and business protocols, considering the latest tax requirements. This is also immediately a good opportunity to assess whether there is a benefit in simplifying existing structures or re-domiciling entities, and whether tax residence requirements are still met. It is not uncommon in large cross-border structures that entities that had a particular objective in the past may have become redundant or inappropriate over time.


A&M has practical experience in assisting fund managers with their governance models and supporting protocols, as well as the practical implementation thereof. If you would like to exchange views or discuss your current governance set-up, please feel free to get in touch with your usual A&M adviser, Roel de Vries or Nick Crama.