Rental property in Box 3 implies you pay Dutch wealth tax over the property you own in the Netherlands. The value is based on the WOZ value, how to reduce that?
Rental property in Box 3
Property and the place of taxation is determined in the tax treaties. If there is no tax treaty between certain countries, in this case the general accepted rule is not much different than the treaty.
The rule is that property is taxed in the country where the property is located. For us that is a logical rule. The property is a burden on the soil of a country. That country makes costs of facilities like electricity, water etc. In return the same country should be able to tax that property.
In your own country, if that is different from where the property is located, you can claim a double taxation relief.
What value is taxed?
To avoid all kind of creative calculations, assumptions and reports, the Dutch tax office sets as value the so called WOZ value. The WOZ value is a value determined by the city in which the property is situated. It is based on recent transactions in the neighborhood.
Via the website www.wozwaardeloket.nl you can look up your WOZ value, or that of your neighbors if you think that is interesting. In the tax return the value is taken of a year before. Example. In the 2021 income tax return the January 1, 2020 WOZ value is taken into account.
What reduces the property in Box 3 taxation?
A debt taken out to purchase the property or to refurbish the property. That debt is a debt actually taken into account for your Box 3 property. This value reduces the WOZ value.
As per which date is the debt taken into account? It is always the January 1 value. Example. In the 2021 income tax return the January 1, 2021 or December 31, 2020 debt value is taken into account.
How to reduce the Box 3 WOZ value?
The moment the property is rented out for a period exceeding two years, the tenant receives rental protection. Rental protection implies you cannot terminate the rental agreement, unless very specific occasions occur. Not paying the rent, arguing the rent are not clear reasons to terminate the rental agreement. A procedure is involved.
There are examples that a tenant argues the rent based on the point system some counties have. They are entitle to pay a much lower rent to you, lower than agreed upon….for the rest of their lives!
You could state that the rental protection reduces the value of your property. And that fact we use. If the two year rental agreement condition is met. Based on the actual rental income a complex calculation can be made. This will then be the new value for the income tax return. A substantial lower value than the WOZ value.
The tax office will contact you after the tax return was filed to check if in fact the conditions of the reduced value were met.
Tax is exciting
We think tax is exciting. Paying too much tax is never exciting. Helping you to file the property you hold in the Netherlands in Box 3 is exciting. Our fee to assist you is EUR 390. After July 1, 2022 our fee goes up to EUR 410 instead.