Legal proceedings have been going on for years about the fictitious way of levying tax on the box 3 capital. After all, a fictitious return was assumed that was many times higher than that received on the savings account. Ultimately, the Supreme Court ruled in December 2021 that the fictitious calculation of box 3 for the years 2017 and 2018 can be disproportionately burdensome and therefore in violation of the human rights treaty. According to the Supreme Court, legal redress must be offered to taxpayers who have objected.

On June 6th last, the Supreme Court ruled that the legal redress as offered by the Tax Office can still be disproportionately burdensome. This brings a levy based on actual income on assets a step closer. In the summer of 2025, taxpayers will be able to submit their actual box 3 return to the Tax Office through a form. In the meantime, it is important to appeal against final assessments if your actual return is lower than the fictitious return.

In 2025 a new bracket will be added to the Income Tax in box 1 for individuals who have not yet reached the state pension (AOW) age. The below chart gives an overview of Box 1 income tax in 2024 and 2025:

Income Tax – AOW not reached	2024	Income Tax – AOW not reached	2025
First bracket up to € 75.518	36,97%	First bracket up to € 38.441	35,82%
Second bracket from € 75.518	49,50%	Second bracket from € 38.441 – € 76.816	37,48%
		Third bracket from € 76.816	49,50%

For taxpayers who have reached the state pension age the following rates and brackets apply for 2024 and 2025:

Income Tax – AOW reached	2024	Income Tax – AOW reached	2025
First bracket up to € 38.098	19,07%	First bracket up to € 38.441	17,92%
Second bracket: € 38.098- € 75.518	36,97%	Second bracket: € 38.441 – € 76.816	36,97%
Third bracket from € 75.518	49,50%	Third bracket from € 75.624	49,50%

*other brackets apply to people born before 1 January 1946. For box 2 rates, please
refer to the business section of the newsletter.

From last year onwards we are requesting a continuous authorisation from the Tax Office for our clients instead of the annual authorizations. This may of course be canceled at any time again. If you receive a letter with a code for this authorisation, please forward it to us so that we can activate this in the system if you are happy with this. This authorisation is required, among other things, to receive copies of tax assessments from the Tax Office in our software program. However, we would still like to receive copies of the paper assessments you receive so that these are checked timely and appeal can be made, if necessary.

If applicable please also provide us with information about your crypto currencies for the tax return 2023. Crypto currencies are part of the assets and it is mandatory to declare this in Box 3. We need the value per 1-1-2023 and 31-12-2023. Even if you have not specified your crypto currency in previous years, it is wise to correct this on your own initiative. The same counts for any other undeclared foreign items. We can assist you in this too. The tax authorities have been authorized themselves to check what cryptocurrencies a tax payer has. This is stated in a new EU directive on data exchange. If it is not possible to view the historic value of your crypto currencies, please ensure you take a screenshot of your portfolio on the 1^st of January each year.

With the new tax interest rules, from July 1st 2024 the Tax Office will charge interest on potential tax debts for the 2023 tax return. This interest amounts to 7,5% for the Income Tax and 10% for Corporate Income Tax. If you expect a high tax assessment and you want to avoid paying high interest, please contact us to request a provisional assessment.

If you own any cash money as per 1^st of January 2023 that exceeds the threshold of € 596,–
(€1.196,– for fiscal partners), it must be declared in box 3. For 2023, this is mentioned in asset category 1, which means it is taxed at the same rate as bank accounts.

As previously communicated, from 2023 onwards the correction that was possible based on the rented status of a second property will be limited. Whereas until 2022, depending on the level of rent, the value could be reduced to maximally 45% of the WOZ-value, from 2023 onwards this will be a minimum of 73%. If you would like to know how this will work out in your situation, please contact our office.

These adjustments, together with the higher box 3 levy for real estate, mean that a house in box 3, whether rented out or not, will be taxed more heavily from 2023 onwards. It may therefore be advisable to request a higher provisional assessment. Do you have any questions about this? Contact our office and we will be happy to look at the options with you.

Also, it is proposed that the Box 3 tax will be adjusted again in 2027, based more on actual return on investment instead of fictitious return on your assets.

In the 2022 tax return it was still possible to choose between the new and the old system of box 3 levy. From 2023 onwards this choice is no longer possible which means the new levy is applicable. In this levy, bank accounts are taxed at a lower rate than other assets. The Tax Office assumes a fictitious return on the asset categories; for bank accounts this is 0,92% and for other assets this is 6,17%, and debts reduce this return with 2,46%. The tax-free threshold is calculated with a weighted average rate based on the breakdown of your assets into the different categories. Subsequently the net return is taxed at 32%.

There are still a number of uncertainties regarding the Box 3 levy, including the calculation of the double taxation in the case of foreign real estate. In addition, further court cases are ongoing regarding the consequences and practical effect of the Supreme Court ruling. We are closely monitoring developments and raising appeals where necessary.

We use Secudoc to guarantee the safe transfer of larger files and documents. If you want to send your files via Secudoc, please send us a request by email. You will then receive an email with a link that leads to the Secudoc upload page. After you upload your files, we can download your uploaded files only by using two-step verification. This provision is especially practical with a larger number of attachments or large files that cannot be sent in one e-mail.

Entrepreneurs can apply for the small business and/or starters deductions and research and development deduction. To be considered for these deductions, you will have to work as an entrepreneur for at least 1.225 hours a year. In case you have a part time employment besides your own business, more hours need to be spent on your enterprise than the part time job. If it is not altogether clear that you make the required number of hours, then make sure you register the hours related to your business.

The investment deductions, SME profit exemption as well as the depreciation facilities are also possible without the hours criterion. For the energy and environmental facilities, as well as the RDA (research and development) you have to make an application before the expense is made. For more information about thresholds, ceilings and criteria, please contact us.