Taxation of assets (box 3) renewed, again

Broadstreet - News - - Taxation of assets (box 3) renewed, again

September 17th, 2019

The taxation of Dutch held assets will be renewed, again. On 6 September 2019 the State Secretary announced the intent to change the way assets are taxed in the Netherlands. Even though changes have already been made to the regime in 2018, there was still a sense of injustice amongst people whose assets solely consisted of savings. The main issue is of course a very low interest rate, which leads to a relatively heavy tax burden on the return on investment. 

So, what are these proposed changes and how will they affect your assets in the near future? In short, positively if your assets solely consist of savings and negatively if they consist of investments. Currently, net assets (assets minus debt) above the threshold of € 30,846 (2020) are taxed in box 3 against a progressive tax rate structure. The proposal suggests dividing box 3 into three sections: (a) savings, (b) other assets and (c) debts. On each of these sections an individual flat-rate will be calculated. For assets under the € 30,846 threshold no taxes will be levied, but (in contrast to the current regime) if the assets surpass the threshold the entirety of the assets will be taxed. 

The proposed flat-rate return for savings of 0,09% is drastically lower than the flat-rate investment return for other assets of 5,33%. A flat-rate debit interest for debts which is based on the average mortgage interest of 3,03% will be taken into consideration. Subsequently, tax payable in box 3 will be calculated as follows: 

(savings x 0,09% + other assets x 5,33%) -/- (debts x 3,03%) = income in box 3

Income in box 3 -/- tax-free income threshold = taxable income in box 3

Taxable income in box 3 x 33% = tax payable in box 3

With assets now separated in different categories in box 3 the State Secretary noted that it is expected that tax payers will be tempted to abuse this new regime to their benefit and annually convert all their assets into savings around the calendar date.  In order to prevent this, discouraging measures proposed as ‘anti-arbitrage measures’ will be introduced. It is expected that the tax proposal for the new box 3 – regime will be presented before the summer of 2020 and will take effect as of 1 January 2022. 

Contact

Would you like to get further insight into how these possible changes may affect your savings and investments? Please contact rhoda@broadstreet.nl or any of our other tax lawyers by calling + 31 (0)20 262 4300

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