Box 3 wealth tax – payment to notary escrow account / VVE deposit

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A Dutch resident tax payer is subject to Box 3 wealth tax of about 1.2%, what if the wealth is transferred to the escrow account of the notary?

Box 3 wealth tax

If you are a Dutch resident tax payer your world wide income is taxed in the Netherlands, but also your world wide assets. Except when you are under the so called 30% ruling, then if you chose wisely, no world wide assets are to be reported.

The general response of mainly the elderly tax residents who actually have assets is that they find this a very unfair tax, as they already paid tax over the assets while they generated the assets. Whether a tax can be fair or not, it funds the BV Netherlands for its expenses.

Box 3 wealth tax – notary escrow account – court case

A creative Dutch tax resident incorporated a BV company, which was not ready till spring the next year. As the Box 3 wealth tax is calculated on January 1 of every year, he transferred already 1.5 mln to the escrow account of the notary  for the deposit to be made in the BV company, just before January 1.

The Dutch tax office challenged the income tax return of this creative Dutch tax resident as the payment made to the notary was a voluntary payment, not a payment to meet an obligation. Hence the amount has not left his possession and was part of his Box 3 wealth tax base. The amount deposited was open to be withdrawn and that made the difference.

Box 3 wealth tax
Box 3 wealth tax

Box 3 wealth tax – VVE deposit

When you purchase an apartment in a building, then you and the other owners are liable for the maintenance of the building. The roof etc needs large maintenance every about 30 years and on a monthly basis you contribute to this future cost.

Should you sell your apartment, you cannot contact the VVE, who is in charge of the bookkeeping of this maintenance, and ask them to pay back your deposit. That is not possible due to the house rules which make the payment made once to be owned by the VVE forever.

However,  at the end of the year the same VVE shows you an overview of your deposit for the purposes of the Box 3 wealth tax return. This is dictated by the Dutch tax office.

How strange is that?

In the court case with the escrow account of the notary it is clearly stated that because the tax payer is free to collect the money from the escrow account as it is not an obligation, the money never left his Box 3 wealth tax base. But the VVE deposit has also left your account due to a future obligation, but you will never be able to collect that and spend on something outside the VVE of your choice. We feel this escrow account court case is a good argument against reporting the VVE deposit.

Orange Tax Services

Box 3 wealth tax is part of our system and even though creativity is a bless, uncertainty is a crime. Hence we file for you the Box 3 assets without being creative,  but with being as precise as we can. Feel free to contact us to learn more about the Box 3 wealth tax. Especially if you have the 30% ruling, because if you accept the tax return the Belastingdienst set ready for you, it has been set ready not in your best interest Box 3 wealth tax wise.