Being a resident of the Netherlands, you have to state your worldwide income in your annual Dutch personal income tax return. If you received your 30% ruling after 1 January 2024, the same rules apply to you as to any other resident taxpayer in the Netherlands.
The Dutch tax system divides income into three categories, or “boxes”:
• Box 1: Labour and pension income
• Box 2: Income from substantial interest
• Box 3: Savings and investments
Box 3 developments
The taxation in Box 3 has been controversial in the past few years. Before 2017, a fictitious interest of 4% was calculated over the total amount of assets -/- debts, before being taxed at 30%. Many taxpayers appealed against the taxation of their savings and investments based on a fictitious interest rate of 4%, arguing that this rate was unfair. These appeals eventually came before the Supreme Court. On 24 December 2021, the Supreme Court issued a ruling that came to be known as "het Kerstarrest" (the Christmas ruling). In this ruling, the Supreme Court judged that the box 3 system was unlawful. As a solution the Dutch government issued a new calculation of the box 3 taxes as from 2017: A fixed percentage of the total amount of assets -/- debts was considered savings and had therefore a lower fictious interest rate. The other part was considered investments with a higher fictitious interest rate. Yet the fictious interest was still higher than the actual interest that most of the taxpayers received from the bank. And again a lot of taxpayers appealed against the calculation of the taxes based on fictious interest rates. According to them the actual capital gains have to be taxed.
Finally, after the June 2024 rulings from the Supreme Court in the Netherlands, the Dutch government plans to introduce a capital growth tax to replace the current flat rate levy, where regular income and expenses as well as realised and unrealised changes in the value of assets are being taxed.
The suggested changes in box 3 taxation might cause a problem for those owning little liquid assets, for example immovable property, to pay the taxes. Originally planned for 2027, implementation has now been postponed to 2028. To maintain tax revenue, the government intends to increase taxes on shares, real estate, and cryptocurrency investments. Currently, the exact details of the new tax system for savings and investments remain unclear. Especially, now the Council of State, the Advisory body on legislation and highest general administrative court, has advised the Dutch government that the proposed system is too complex to implement.
Stay tuned for more news on the proposed changes—and prepare for potential shifts in how your savings and investments are taxed!
Author: Kavita Sewkaransing, Wecountancy Expat Services