The Netherlands’ Ministry of Finance announced on 19 June, 2024, that it had submitted draft legislation to reform the taxation of Box Three income, which includes taxable income from taxable earnings from savings and investments.
The draft bill proposes a new taxation system for Box Three income which ensures taxpayers pay taxes only on actual earnings from their assets. This is in contrast with the current system, in which taxes are based on an assumed rate of return.
Under the proposed system, Dutch taxpayers with savings will likely pay less tax due to the relatively low interest rates on savings. Meanwhile, taxpayers with investments in assets are expected to pay more.
The bill now also includes how the tax on immovable property in Box Three is calculated, which is subject to capital gains tax. This means that with indirect returns the value development is taxed during the period that taxpayers own the real estate.
For direct returns, a distinction is made between three categories:
- If a property is rented out for at least 90% of the year, the rental income is taxable, and the annual maintenance costs are deductible;
- If a property is not rented out throughout the year, the direct return is calculated via a property addition (2.65% on the WOZ value);
- For mixed-use, the rental income and the real estate addition are taken into account, and the highest amount is taxed.
The new system is expected to take effect on 1 January, 2027.
