Every Dutch citizen pays tax on the income derived from their assets. This income is also known as the income from savings and investments referred to, or box 3-revenue. Recently, the final flat-rate return adopted for 2017.
Box 3 up to and including 2016
Up to and including 2016, the benefit you derived from your assets was assessed at a flat rate of 4%. Tax of 30% was payable on the flat-rate return of 4%. This resulted in a tax burden of 1.2%.
Example
A taxpayer without a partner has €100,000 in savings accounts with a bank and €400,000 worth of securities as at 1 January 2016. In addition, they own a holiday home worth €500,000. The tax due for 2016 under Box 3 is then calculated as follows.
| Wealth in box 3 | 1.000.000 |
| Less: tax-free capital | 24.437 |
| Taxable base | 975.563 |
| Yield (4%) | 39.022 |
| Load (30%) | 11.706 |
Box 3 from 2017 onwards
From 1 January 2017, this scheme will undergo significant changes. It’s going to get a lot more complicated!
There are two categories of return. Category I relates to savings, whilst Category II relates to investments, shares, bonds and property. Each category has its own flat-rate return. This flat-rate return is reviewed annually on the basis of the most recent data on the actual return achieved. For example, the average savings interest rate over the previous five years determines the return on your savings portion. The return for Class II is determined on the basis of the average long-term return and the return realised in 2015.
Final flat-rate returns for 2016
The following flat-rate rates of return for Box 3 have recently been definitively set for 2017:
- Class I return on the savings component: 1.63%;
- Class II return for the investment component: 5.39% (the previously given estimate was 5.5%).
Your assets in box 3 are also divided into the following brackets:
- €25,000 to €100,000
- €100,000 to €1,000,000
- From €1,000,000
As you can see above, there is a tax-free allowance of €25,000. This applies per person. Each tax bracket has a different ratio of savings to investments. Due to the differences in the asset mix, each bracket has its own flat-rate return:
| Power | Ratio saving/ investing | Lump sum | Tax- pressure |
| €0 to €25,000 | - | - | - |
| €25,000 to €100,000 | 67%-33% | 2,87% | 0,86% |
| €100,000 to €1,000,000 | 21%-79% | 4,6% | 1,38% |
| Over €1,000,000 | 0%-100% | 5,39% | 1,61% |
Example
The taxpayer in the previous example has exactly the same assets on 1 January 2017 as in 2016. The tax in box 3 is therefore:
| Assets in Box 3 | 1.000.000 |
| Less: tax-free capital | 25.000 |
| Taxable base | 975.000 |
| Calculation of the flat-rate return: | |
| 75.000 * 2,87% = | 2.152 |
| 900.000 * 4,6% = | 41.400 |
| Total | 43.552 |
| Tax 30% | 13.065 |
Minimise your losses!
Whereas previously a tax rate of 1.2% applied to total assets, this rate is now higher if your assets in Box 3 exceed €100,000. Box 3 will therefore become considerably more expensive. A significant flight of assets from Box 3 is therefore expected. This flight will often end up in box 2. VWGNijhof would be happy to advise you on your options.
Damage
The difference in tax liability between the two examples above amounts to €1,359 (additional income tax payable). However, if you look at the actual tax burden, the impact turns out to be much greater. Suppose your actual return is 0.5% (which, given current savings interest rates, is unfortunately by no means unrealistic). In that case, your return would be: 0.5% * €1,000,000 = €5,000. You would pay €13,065 in tax. That represents a tax burden of no less than 260%!