Box 3 updates

What does this mean for you?

The taxation over your box 3 assets will likely change significantly over the next few years. The taxation for the years 2017 -2022 may also deserve your attention. Please refer to our webpage Box 3 Guide for a more detailed look at your position and the possibilities if you disagree with the legal redress offered to you. In addition, you can make use of our (Dutch) box 3 calculation tool to calculate whether the restoration of rights over the years up to and including 2022 will result in a more favourable outcome for you.

Below is the outline of the changes for box 3, with regard to the restoration of rights, bridging regime and the new box 3 system as of 2026.3.

Restoration of rights based on the Supreme Court ruling

On 24 December 2021, the Dutch Supreme Court spurred the legislator into action by declaring the current box 3 system (from the tax year 2017 onwards) to be contrary to the right to property and the ban on discrimination. 

Following this, the government introduced a modified box 3 levy in a Decree for the years 2017 to 2022 (restoration of rights) and thought about a solution for the years 2023 to 2025 (the bridging legislation). This has now been converted into law. From the year 2026, the government envisages introducing an entirely new 'box 3' system, based on the taxpayer’s actual return.

Restoration of rights in the years 2017-2022

The restoration of rights is shaped by the introduction of a so-called ‘flat rate savings variant’. The calculation of box 3 income under the flat rate savings variant no longer assumes a certain asset mix, but instead matches the actual distribution of three categories of assets:

1. bank deposits (which also includes cash) on reference date 1 January;

2. all other assets on 1 January; and

3. debt on 1 January

Who gets legal redress?

The following three groups of taxpayers are eligible for the restoration of rights:

1. taxpayers who objected to their income tax assessment in time for the relevant calendar year and whose objection was designated as a mass objection for the years 2017-2020;

2. taxpayers who did not file an objection, but whose assessment for the years 2017-2020 was not yet irrevocably fixed on 24 December 2021; and

3. all taxpayers for the years 2021-2022.

Non-objectors: late or no objection raised

Non-objectors are taxpayers who were not part of the mass objection procedure and whose income tax assessments 2017 to 2022 were irrevocably fixed on 24 December 2021. Based on a Supreme Court ruling of 20 May 2022, the government is not obliged to provide legal redress to this group.

‘Mass objection plus’ procedure

As many ex officio reduction requests have been filed and more are expected, it was decided on 4 November 2022 to launch a so-called 'mass objection plus' procedure in which all non-objectors automatically participate. Should this procedure result in restoration of rights for non-objectors, the Tax Authorities will grant this restoration of rights to all box 3 taxpayers. Incidentally, the State Secretary considers this procedure to have little chance of success.

It is possible that the procedure could eventually end up before the European Court of Human Rights (ECHR) as well. A side note in that case is that a ruling of the ECHR is not covered by the 'mass objection plus' procedure. Therefore, for a very small and specific group of taxpayers with substantial investments, where the actual income is significantly lower than the determined income in box 3, it seems sensible to still file an ex officio reduction request independently. Please note that an ex officio reduction request can be submitted up to five years after the end of the tax year. So for tax year 2018, an ex officio reduction request can be submitted up to 31 December 2023.

Object to legal redress received?

While the flat-rate savings variant reasonably implements the 'Christmas ruling' of the Dutch Supreme Court according to the government, taxpayers with returns lower than the applied flat rates may still feel disadvantaged and thus file an objection. The state secretary is in contact with various interest groups regarding the follow-up of possible proceedings. He will consider whether procedural arrangements can be made that are the least burdensome as possible for taxpayers, tax advisers and the Tax Authorities.

Only legal redress for fiscal partner who filed an objection

If only one of the fiscal partners has filed an objection, only that partner will get legal redress. Despite the fiscal partnership, both partners are individually taxable and an assessment is subsequently imposed on both partners individually. It follows from the systematics of the legislation that an objection must be filed per assessment.

PwC has developed a calculation tool (in Dutch) that allows you to calculate your box 3 income using the flat rate savings variant. In the result, you can see which calculation method is most favourable for you.

Other adjustments box 3 2023

Value with vacant possession ratio not abolished, but adjusted

The value with vacant possession ratio is a valuation method for rented houses. This value with vacant possession ratio has been adjusted instead of abolished, as had been announced in the Coalition Agreement. The government plans to update the vacant possession ratio regularly in the future if necessary, possibly once every five years. 

If the annual rent exceeds 5 percent compared to the WOZ value, the vacancy rate is increased to 100 percent. Furthermore, temporary contracts are excluded and in case of letting to related parties, the highest percentage in the table (100 percent) is the starting point. 

If upon expiry of a fixed-term lease, a new contract is entered into consecutively, or if the landlord does not inform the tenant in time about the end of such a lease, the lease is considered to have been extended for an indefinite period. In that case, limited rent protection no longer applies, making the vacant possession ratio applicable. This already applies after the first renewal of the lease.

Gradual tax rate increase and increase in tax-free allowance

The discussions following the Supreme Court ruling of 24 December 2021 are all about calculating the box 3 return. Box 3 tax is levied over this (deemed) return. As of 2023, the box 3 tax rate will be increased in steps from 31 percent to 34 percent.

In addition, the tax-free allowance is increased from EUR 50,650 to EUR 57,000 per taxpayer from 1 January 2023. For tax partners, this increased the tax-free allowance from EUR 101,300 to EUR 114,000.

The system of the bridging regime automatically divides the tax-free assets proportionally among the three assets categories of bank deposits, other assets and debts. Thus, taxpayers cannot choose which asset categories to apply the tax-free assets to.

A flat-rate system is less complex and refining the existing system is less radical than introducing a new system, according to the state secretary. 

• The flat rate of return is determined for the following individual assets:

  • Bank balances, including share of VvE savings and notary's third-party account

  • Bonds

  • Properties rented out

  • Properties not let

  • Non-rented properties

  • Non-residential properties not let

  • Cash

  • Receivables

  • Property debts

  • Other debts

  • Capital insurances

  • Rights to periodic benefits

  • Net annuities and net pensions

  • Cryptocurrency

  • Other assets, including securities other than bonds.

• The percentages are determined based on the average net return (i.e. taking costs into account).

• For asset classes with a real probability of negative average returns in a tax year, multi-year flat rates are applied, as in the current situation. A simpler formula applies here: the average return of the five or ten most recent years.

• The tax-free wealth is converted into tax-free income.

• The parameters can be used to make the ‘concrete’ variant budget-neutral in further detailing.

Comparison with system based on actual return

When comparing the two systems, the following is of interest:

• A levy based on actual return is absolute and therefore has fewer risks. A possible alternative based on the Box 3 Bridging Act scores best with regard to simplicity for taxpayers and implementation.

• The refined flat-rate system scores significantly better on simplicity, but is less in line with the actual return achieved by individual taxpayers in a tax year.
• If a rebuttal system is added to the variant based on the Box 3 Bridging Act, the tax levied will better match the actual return of taxpayers with a lower return than the flat-rate, but this comes with additional complexity.
• While individually determining the actual return is fairer, it is more complex, both for taxpayers and implementation, than determining a flat rate return.