Challenging Box 3 assumed yield procedure update. We experience excitement among tax payers to fight the horrible Box 3 assumed yield. Update about the procedure.
Challenging Box 3 assumed yield – what is that about?
The Dutch Government introduced in 2001 a simplified tax system. Boxes were introduced, box 1, 2 and 3. In Box 1 your employment income, profit income and other labor related, alimony related income is reported. Box 2 is only for those who hold more than 5% of the share capital of a company. And in Box 3 the world wide assets and debts are reported.
The Dutch were up to 2001 world champion in not reporting the dividend income or interest income. The shares were purchased for a low value, sold just before the dividend payout for the higher value. As we do not know the concept of capital gains and as no dividend was paid, nothing to report. That is one example of the many creative solutions to avoid asset tax.
The Government challenged all creative solutions by assuming a yield and tax that assumption. Since 2017 the Dutch tax office change the system slightly, we had negative interest in the bank account and in court the justification of this assumed regulation was fought. Our Government lost, rules were illegal.
Challenging Box 3 assumed yield – what to do to challenge?
The high court ruled that the Government should provide the opportunity to proof the true yield is less than the assumed yield. If that is proven, the Box 3 tax is to be taken from the true yield.
True yield is the combination of interest, dividend, rental income, other passive income, realized gains and unrealized gains. Costs cannot be deducted.
Challenging Box 3 assumed yield – procedure
The Dutch tax office promised to have available the forms this summer (2025). Starting from July the forms will be online available. The system is first tested during a number of months to check the effectiveness of the forms. Then from November 2025 the tax office expects to issue assessments as a result of lower true yield.
Challenging Box 3 assumed yield – discussion points
The high court ruled that costs cannot be deducted. The high court also ruled that the Government can make changes in the interest of the tax payer. The introduction of costs deductions for the determination of the true yield has been discussed. The cost deduction affects the tax collection level and will have a significant delay on the introduction of the form, hence it has been decide not to introduce the cost deduction.
The investor that invests via transparent setup cannot deduct costs. If that same investor would have invested in an investment fund, the net result (after cost deduction) is to be reported. This is experienced as unfair treatment. The Government ruled that these method of investments cannot be treated the same, hence a different taxable outcome is not regarded discrimination.
Trading results true result need to be calculated based on currency day value. As this is causing a large administrative burden, it is accepted that average monthly currency value can be used as well.
The introduction of this true yield reporting does not provide the opportunity to move investment property to Box 2 without charging the transfer tax.
Tax is exciting
We think tax is exciting. The Box 3 drama we find not exciting at all to be honest. The Box 3 tax system was ruled illegal. The newly introduced solutions were all ruled illegal as well. The justice system stated in a public letter that they expect our Government to be able to create legal legislation.
