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Box III taxation

BOX 3 TAXATION

Box 3 will be changed: last week the Dutch State Secretary of Finance presented an amendment to the current box 3 regime under the heading ‘1.35 million individuals with saving accounts will no longer pay box 3 taxation under new proposal’. Although the proposal will reduce taxation on savings, box 3 taxation may increase for foreign taxpayers (owning Dutch based real estate), portfolio investors, second homeowners (second home based in the Netherlands) and bondholders, to finance the proposal. Please find a brief outline below.

Current box 3 regime

The current system is based on a deemed return on net assets that are part of box 3, without any distinction with respect to the type of asset (savings, portfolio investments, real estate, etc.). The deemed rate of return increases as net assets increase. In the current regime box 3 liabilities reduce the box 3 net asset base, and hence, reduce box 3 taxation. There is also a tax-free allowance of approximately € 30,000 (€ 60,000 for fiscal partners). A 30% tax rate is applied to the deemed return.

Proposed box 3 regime

The new regime distinguishes between different type of assets. Three categories are distinguished and each applies a specific deemed return on investment. This deemed return is assessed annually on the basis of the actual average market return. At this moment the proposal includes the following deemed rates of return.

Savings (0.09%)
Other assets (5.33%)
Debts (3.03%) 

Box 3 income is the sum of the deemed return on savings (0.09%) and the deemed return on other assets (5.33%), reduced by the deemed interest on box 3 liabilities (3.03%). The resulting deemed income is reduced by a tax-free box 3 income allowance of € 400. 

The tax rate on box 3 income is increased to 33%. 

If box 3 assets do not exceed (rounded) € 30,000 (€ 60,000 for fiscal partners) box 3 taxation would continue not to apply. Important to note, however, is that liabilities will not be taken into account when assessing whether this limit is exceeded. 

A few conclusions 

The proposal is beneficial to taxpayers who have (mainly) savings. Saving assets up to approximately € 440.000 (€ 880.000 for fiscal partners) are (almost) not taxed in box 3. Taxpayers with (mainly) portfolio investments may face an increase in their tax burden. This also applies to foreign (non-Dutch-resident) taxpayers (owning Dutch based real estate). Due to the deemed interest on liabilities being lower than the deemed return on portfolio investments, certain taxpayers may pay (significantly) more box 3 taxes in comparison to the current regime. Especially in cases where the deemed return on ‘other assets’ is not actually achieved in practice, the proposed regulations may have significant impact. 

Effective date new regulation 

The aim is to present the legislative proposal to the House of Representatives in 2020. The legislation subsequently needs to be implemented in the tax authorities’ IT system and would then probably enter info effect as from 1 January 2022. 

If you would like to asses the impact of this legislative proposal to your personal financial situation, please contact Rolf van den Eerenbeemt, Hans de Vries or Linda Groenewoud.