Evert-Jan.Spoelder@borgentax.nl

Takeaway: If your organisation manages or invests through a co-investment or carried interest vehicle within a larger fund, review the tax classification. A determining factor is whether the vehicle follows the investment strategy of the larger fund it feeds into.

Since 1 January 2025, Dutch and foreign limited partnerships are treated as tax transparent by default. An exception applies when the partnership qualifies as an FGR, which triggers non-transparent treatment instead. The position paper addresses whether the foreign partnership should be classified as an investment fund or a UCITS-equivalent fund under Dutch financial supervision law.

The Dutch tax authorities conclude that both the co-invest fund and the carried interest fund qualify as feeder funds: vehicles without an independent investment policy that instead follow the strategy set by the manager of the larger investment fund. Feeder funds qualify as investment funds under Dutch financial supervision law. That the co-invest fund's capital contribution typically ranges between 1% and 5% of total committed capital, and that the carried interest fund holds only a modest financial stake tied to pre-agreed profit rights, did not change the outcome. 

 

The position paper also extends beyond EU borders. Scotland implemented AIFMD before Brexit and retained the framework afterwards, with the FCA supervising fund managers similarly to the Dutch AFM. The Dutch tax authorities conclude that a Scottish fund with an FCA-licensed manager qualifies as an investment fund under Dutch rules. As a result, managers of non-EU co-invest or carry structures should no longer rely on this perceived exception. 

 

To summarise: the Dutch tax authorities confirm that co-investment and carried interest funds within a larger fund structure may qualify as FGR, that limited employee capital contributions do not prevent this outcome, and that non-EU vehicles such as Scottish investment funds with an FCA-licensed manager can meet the same requirement. Fund managers should review existing co-invest and carry structures against the FGR criteria with this new position of the Dutch tax authorities in mind. For background on how the broader 2025 entity classification rules apply to fund structures, see our earlier analysis of the 2025 entity classification rules for funds. Our Investment Management team can review your co-investment and carried interest structures and advise on the implications for your organisation.

 

 

Frequently asked questions

How do the Dutch entity classification rules affect foreign limited partnerships since 2025? Since 1 January 2025, Dutch and foreign limited partnerships are in principle treated as tax transparent, unless they qualify as an FGR.

What is a fund for joint account (FGR) under Dutch tax law? An FGR, or fonds voor gemene rekening (fund for joint account), is a Dutch tax construct that, unlike most limited partnerships since 2025, is treated as non-transparent for Dutch tax purposes. Qualification depends on four cumulative conditions, including whether the vehicle meets the definition of an investment fund under Dutch financial supervision law.

What are the four conditions for FGR classification? A partnership qualifies as FGR if it is an investment fund or UCITS-equivalent fund under Dutch financial supervision law, invests for joint account of more than one participant, limits its activities to normal asset management, and its participation rights are not freely transferable except back to the fund itself.

Can a co-investment or carried interest vehicle qualify as an FGR in the Netherlands? Yes. The Dutch tax authorities confirmed on 30 July 2026 that team co-investment and carried interest vehicles forming part of a group structure around a larger investment fund can qualify as an FGR, provided all four conditions are met.