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Box 3 debacle – Dutch asset tax contrary to EU-law – Explained for dummies

Box 3 debacle

As most of you most likely heard, the Dutch box 3 assets tax is currently being debated.  Last year, on 24-12-2021 the High council ruled their decision regarding the Box 3 asset tax. The High council ruled that the Dutch box 3 asset tax is contrary to the EU-law, the right to enjoy your assets. This has never happened before and therefore raises a lot of questions and concerns. What will happen to solve it, how will my assets get taxed, what do I need to do. All questions we fully understand, but not all of them can be answered just yet.

Why is Dutch box 3 asset tax contrary to the EU law?

In order to further understand the issue, it is first important to note the current way of taxing assets in the Netherlands.

Currently, this is done over the value per 01-01-of the relating year, so for 2020, per 01-01-2020. Over the value per 01-01-relating year, the notional income has to be calculated. This is done via the following brackets (2020 rates):  

BracketYour (part of) taxable assets(Savings)
Percentage
0,07%
(Investors)
Percentage
5,28%
1to € 72.79867%33%
2from € 72.798 to € 1.005.57321%79%
3from € 1.005.5730%100%
Box 3 debacle

The result of this bracket is called the notional box 3 income. This income is taxed for 30% (2020 rate).

As you can see, there are 2 percentages in box 3, the lower savings percentage and the higher investors percentage. However, you cannot state how much you save and how much you invest, this is decided by the Tax authority.

This means, that if you for instance have EUR 1.000.000 in savings but EUR 0 in investments, you will be taxed over 33% of EUR 72.798, 79% over EUR 932.775 and over 100% of  EUR 5.573 as an investor. However on savings, you are not expected to have the same gains as an investor, hence it would not be fair if you are taxed as an investor, without the related gains.

This is now deemed unfair.

Box 3 debacle

What will happen now?

Currently, the Dutch government and the Dutch Tax authority are trying to find a solution. A permanent solution is expected to take place in 2025. This means that the years 2017-2024 do not have a solution yet. For these years, the Tax authority expects that a regular tax return is filed, so with assets valued per 01-01- of the relating year. In order to correct the current box 3 asset tax, an objection needs to be filed. This objection is not a regular tax objection, but this is a class action objection. This means that all objections will be considered at once, instead of each separately.

How will I be taxed in the years 2017-2024?

At the moment of writing this article (11-02-2022), this is not known yet. It is expected to receive a final say in May, 2022.

We do already know that the gains will be taxed. It is not sure yet whether realised gains or unrealised gains will be considered.

What happens if I do not object?

This is also not know yet. This is currently being debated by the Dutch government and Tax authority. For now, only if you object, the result of the tax return will be adjusted. In May, 2022, it is also expected to know more details regarding what happens if you do not object!  

A very strange period for us as Tax advisors, but most likely even more confusing for you as an Expat.

We understand that the box 3 asset tax is something that you have questions about. We currently unfortunately, do not know more than above.

Tax is exciting

We think tax is exciting. My name is Kelly and I think tax is exciting.  

If you would like us to investigate whether filing objection would be beneficial for you, feel free to reach out and we will investigate once the final rules are in place!

If you have other questions, feel free to reach out!

Box 3 debacle
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