Wealth tax

Inkeerregeling

 

As an international in the Netherlands you will have to pay tax on your worldwide savings and investments in case you are not under the 30% ruling (anymore).  The Dutch capital gains or wealth tax is in fact nothing more than the tax on fictitious income from savings and investments; the so-called Box 3 tax, although ‘under construction’. The reference date for taxed box 3 assets is January 1.

Read some example situations of wealth tax.

Recent Box 3 developments

A recent development is that due to a High Court decision on box 3, the tax authorities have confirmed that no box 3 tax assessments will be raised for the time being. We would not advise taking any action with regards to saving on box 3 taxation until there is more clarity as to how the Box 3 tax will work out. The High Court concluded that the fictitious return on investment often leads to a relatively heavy financial burden, especially if taxpayers’ assets are mostly savings.

Tax-free capacity

Not the entire box 3 capital is taxed. In 2022, the first €50,650 (double for tax partners) will be exempt. This is called the tax-free allowance. In 2021 this was still €50,000 (€100,000 for partners). Anyone who saves green and/or invests green is eligible for additional tax-free capital of €61,215 (2022).

Box 3 tax rates

In 2021, the rate on the notional return in box 3 has been increased to 31%. This rate will not be adjusted in 2022.

Below is a schematic representation of the box 3 tax in 2021 and 2022 with 4 categories of wealth bases.

Fictitious return

From 2017, a statutory regulation was introduced, changing the fictitious or fixed return. Already since 2017, the actual return that people achieve on their net wealth (excluding the equity capital on their own home) is not relevant. Box 3 has three rate brackets. However, the Tax and Customs Administration assumes that wealthy people also invest a lot. This means that, depending on the size of the wealth, it is assumed that part of the wealth is saved and part is invested (the so-called ‘asset mix’). The return that is expected to be achieved for both capital elements has been laid down by law (the fixed amount). This does not take into account the actual choice of taxpayers or the actual return. According to the tax authorities, investments yield much more, so in the fictitious world of the tax authorities, wealthy people in The Netherlands normally invest 33 to 100 percent of their wealth in shares, investment funds, or real estate. There is as yet no prospect of taxation on the wealth in box 3 over the actual income.

End of 30% ruling

When your 30% ruling ends you become regularly taxable in the Netherlands for your worldwide wealth (Box 3 tax) and you will have to declare these in your tax return. Make sure you do this properly to avoid high fines. In case you are still under the 30% ruling but have not opted for partial non-domestic taxation you will also have to declare your (worldwide) assets in box 3. Dutch real estate (not the owner-occupied first dwelling) is always taxable, also during the 30% ruling period. We do recommend double-checking if you have correctly opted for partial non-domestic taxation since a mistake can be easily made. In case you forgot to opt for partial non-domestic taxation we can check what tax obligations you have.

Declaring assets abroad or amnesty ruling

If you are tax liable in the Netherlands for your Box 3 but have assets here or abroad you will have to declare these. You are then considered to be a domestic taxpayer. If you do not declare your (worldwide) assets you are risking a maximum fine of 300%. Chances that undeclared savings come to the tax inspector’s attention have increased. Contact our tax consultants to help you find out if your assets abroad have to be declared. If you have already forgotten to mention foreign assets in a previous tax return, we can help you sort out your tax situation. If necessary we can help you present your case in the best way to the Tax Authorities to minimize the fine.

Saving tax in box 3  

The reference date for taxed box 3 assets is January 1, so you need to make sure the amount is as low as possible on that date. Here are a few tips to reduce your assets in a smart way before 1 January next year. It is recommended to have an expert tax consultant check which of these or other options apply to your situation:

  • If you have substantial assets, it could be an option to set up an OFGR or BV to save box 3 tax;
  • Make a gift to a relative or non-relative that will be used for the purchase, repayment, or renovation of a home that is or will be a primary residence. Till 2024 an amount of approx. € 106.671.is free of gift tax;
  • Use your savings to pay off part of the mortgage on the primary residence (box 1). In addition to wealth tax, this often also saves you some mortgage interest;
  • Deposit money into an annuity. Money that has been deposited as an annuity is no longer taxed in box 3. There are conditions attached to this.

Example situations of declaring assets abroad