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Family money parked on your bank account, do you pay income tax over this money?


Due to the economic events in the Southern European countries and trickered by the situation that happened on Cyprus, a lot of South European families are worried to lose their balance in the bank. Sometimes they have family members in Northern European countries, and ask them to keep the money in a bank account in those countries. Is this a taxable event for the keeper of the money?

In the Netherlands we tax the world wide income and world wide assets. The world wide assets, minus debts, are taxed at 1.2%. The banks report to the tax office the balances in the account. This implies that family money in your bank account is included in the reporting. However, the money is not yours, it is your family money, so why pay tax over this amount?

As stated above, it is not your money. Hence the best you can do with your family is to draw up a loan agreement where your family states to have loaned you a certain amount, you agree on the interest and that the family can demand for the money to be repaid in full at any given moment. The result is that the Dutch tax resident, keeper of the money, has a debt. This debt reduces the world wide assets. So you could think that the case is solved now. The bank report the balance of your account, you reduce your world wide assets with the debt and then you pay tax over the correct amount. Not entirely.

In the Box 3 calculation of the tax over your world wide assets there exists a threshold for debts. Debts are only taken into account for the amount exceeding the EUR 2900 (2013 details). That implies EUR 2900 of the debt is not taken into account, so you pay 1.2% over EUR 2900 debt being EUR 34,80 which is a result of the save keeping of the money of your family. You can see this as the costs of keeping the money save. Have your family reimburse you for this amount at the same time when you pay them the interest due over the debt.



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