Box 3 tax payers received a message from the Dutch tax office this week. They think, we finally can start claiming back the tax. But no.
Box 3 tax payers received a message from the Dutch tax office
The letter send out this week was predicted for many months already. It is simply a message announcing that they have not been forgotten. Right now, the Dutch tax office cannot process the tax refund. Spring 2025 a form will be available via which the too much amount of tax can be claimed.
Box 3 tax payers: what has changed?
The Dutch high court ruled the Box 3 taxation illegal as it can erode the base. That is the short version of the verdicts. The tax payer is now offered to counter the assumed yield calculation with the true yield calculation. But is it in fact true yield?
The Dutch high court has earned its respect, but sometimes I doubt the expertise shown. Like in this case. The high court ruled that the tax payer should be able to counter the assumed yield calculation. This can be countered with the true yield, interest, dividend and realized gains. Costs cannot be taken into account. And the unrealized gains also need to be taken into account.
Box 3 tax based on unrealized gains
Global accounting rules accept that unrealized gains cannot be taxed. Still the Dutch high court ruled that the unrealized gains need to be taken into account. Maybe I am a simple tax advisor, but how could such an expert team as our high court come to this verdict?
And if you want to tax the true result, that is the full base of the verdict, how can the high court rule out costs? The persons to whom this Box 3 taxation concerns are high valued individuals that most likely hire an investment consultant to manage their accounts. Why not deduct these costs form the result they create?
Box 3 tax based on true results
This part is the boring part, as for most of us non comprehensible. The true result if applicable for your full assets. You cannot pick one and keep the other at assumed yield.
The shares on the stock exchange value is known by the financial institutions. But if you loaned money for the investments, you cannot deduct the interest. But you do need to evaluate the loan, should the interest rate have changed during the year. Has the interest rate gone up, then you had a cheaper loan, hence value should go down. If the interest rate went down, you have a more expensive loan, the value goes up.
If you have a residential property in your Box 3, the WOZ value is the base, but is it? In the event you own commercial property in your Box 3, you need to evaluate the start value, end value to calculated the unrealized result.
Box 3 tax: assumed yield not that bad
Experts in our field have already made many calculations based on the true result. Due to the recent stock exchange development, the unrealized gains make the true result calculation absolutely not interesting. The assumed yield is not that bad.
Another aspect is that you need to pay an accountant or tax advisor to make these calculations for you. Probably you are aware they do not work for free. Obviously we love the client that prefer to pay us more than the tax office.
Box 3: no yield but a loss was made
In the event your true result in your Box 3 shows a loss, then indeed you pay no Box 3 tax. The Dutch tax office has indicated that you cannot claim tax back. The loss is to be set forward to the next year. Only if the next year has a positive, you can set off the negative.
Box 3 choices
During the years 2022 up to 2026 you have the choice to use the assumed yield or the true yield. In the year 2027 new tax rules will be into place. We expect capital gains tax to be introduced, but we fear unrealized capital gains tax was too lucrative not to introduce as well.
Tax is exciting
We think tax is exciting. Having introduced by the Dutch high court a true yield system that can only include income, but no costs is not true at all. The Dutch high court also introduced taxation of unrealized gains and we predict that more court cases will follow, as globally this is not accepted.
The Dutch Government was known in the world as a stable country tax wise, but by showing this type of incompetence over a large number of years it not good. Not good for confidence, the tax payers but also not good for the tax office.
