Adieu 30% ruling, Hello wealth tax – declaring foreign assets Netherlands
The 30 percent ruling – a financial gem that grants you tax-free 30 percent of your salary tax-free for five years. Dubbed the “30% tax facility,” this enticing benefit extends its reach to not just employees, but entrepreneurs as well, thanks to a clever loophole. A beacon for skilled migrants, the 30% ruling boasts magnetism and, yes, a touch of controversy.Yet, this advantage isn’t an open door for every expat in the Netherlands; it rests upon a checklist of conditions.
Click here if you want to see if these conditions apply to you. But today we won’t inform you about this favourable ruling or check if you are eligable or not. If you are looking for these topics, please check out our article here! No, today we want to talk about the end of the 30 ruling. It is a big turn of events for an expat to bid farewell to the 30% ruling.
Without the 30% ruling, you can no longer opt to be considered as a partial non-domestic taxpayer. In other words, you will be treated as a full resident tax payer and you will need to be declaring foreign assets in your Dutch tax return.
Declaring foreign assets Netherlands
So if you own a second home, shares, bank accounts cryptocurrencies, NFTs, or investments, they will need to be declared in box 3. If the total sum surpasses the tax-free threshold (€50,650 per person in 2022), you will need to declare them in your annual income tax return under Box 3. Conversely, you can offset debts like a student loan or secondary home mortgage. Moreover, after your 30% ruling has ended, dividend from a major shareholdership is taxable under Box 2.
What actually is box 3 ?
Box 3 tax applies to your worldwide net wealth – savings, investments, and real estate. Taxation isn’t on asset income or gains but on an estimated yield derived from the asset value. From 2027, a new system will replace current box 3 taxation, annually taxing regular income and asset value growth, i.e. capital gains. A new system? Yes, if you have followed the Dutch news these past 2 years, you would have noticed the box 3 taxation in the front headings!
Box 3 Netherlands
Basically, The Dutch wealth tax, also known as Box 3 tax, taxes notional income from savings and investments. It’s currently undergoing changes and applies to assets as of 1 January. A recent High Court decision has led to the temporary suspension of Box 3 tax assessments. It’s advisable to await clearer guidance on reducing Box 3 tax before taking action. The High Court emphasized that the assumed investment returns can pose a significant financial burden, especially for those with savings.
Minimize wealth tax Netherlands
Once your 30% ruling terminates, you’ll be subject to regular Dutch taxation on your global wealth (Box 3 tax), which means declaring it correctly in your tax return is necessary, to avoid hefty penalties.
30 % ruling and forgot to opt for non-domestic taxation?
Even if you’re still under the 30% ruling but haven’t chosen partial non-domestic taxation, your (worldwide) assets in Box 3 must be declared. Dutch property, excluding your primary residence, is always taxable in box 3, even during the 30% ruling. Ensuring correct partial non-domestic taxation opt-in is advised, as errors are common. If you’ve overlooked this which is not uncommon, we can assist in clarifying your tax obligations.
“Dutch property, excluding your primary residence, is always taxable in box 3, even during the 30 ruling“
It is wise to let one of our experts have a look at your situation if your 30 ruling is ending. Imagine a scenario featuring a German expat whose 30% ruling concludes on January 1st, 2021. As her non-domestic taxpayer status ends, she will have to pay Dutch box 3 tax for her worldwide assets. On savings in Germany, Dutch box-3 tax is now applicable. Our tax specialists can aid her in crafting strategies to mitigate her tax obligations. One option involves reallocating savings to partially repay her Dutch mortgage, resulting in reduced box 3 tax liability, though accompanied by diminished mortgage relief. This not only cuts down the mortgage interest but also lowers savings, translating to decreased box 3 taxation.
Contact us and find out what can be done in your situation!