With property abroad, it is important to consider the taxation in the country where the property is located. When renting out the property, the VAT aspect is also something you need to think about for tax purposes. Regarding box 3, it is stated that the holiday home becomes a lot more expensive in private, but what is the impact of this?
Income tax abroad
The holiday home abroad is (almost always) taxed in the country where the property is located. For this, we refer you to an adviser in the relevant country.
The arrangements between the Netherlands and the relevant foreign country are usually set out in a tax treaty between the two parties.
VAT on rentals
Rental property in the Netherlands is not initially taxed with VAT. But when it comes to short stays, it is. Abroad, the foreign tax authority decides on the turnover tax of the rental income. For this too, we refer you to an advisor abroad.
Income tax in the Netherlands
The second home, whether located in the Netherlands or abroad, is initially taxed at a flat rate as income from savings and investments by (approximately) 6% of the (WOZ) value of the property. To which the debt (if any) may be deducted by (approximately) 2.5%. Rent received, interest paid, maintenance costs and appreciation are not yet relevant for the bridging law. However, if the actual return is lower, the maximum taxable amount is the actual return.
To avoid double taxation, in the case of property abroad, a reduction of the box 3 tax is granted in the Netherlands. This reduction is calculated on the basis of the (WOZ) value, any debt and the fixed return calculated on the other asset categories.
In summary, the home abroad is initially taxed via the Dutch box 3 levy. Against this, a double tax relief is granted. In most cases, some Netherlands levy arises anyway. Below is the explanation in euros.
| 1-1-2024 | Forfait% | Efficiency | |
| Savings | € 100.000 | 1,03% | € 1.030 |
| Equity portfolio | 75.000 | 6,04% | 4.530 |
| Second home abroad | 220.000 | 6,04% | 13.288 |
| Debt second home abroad | -120.000 | 2,47% | - 2.964 |
| Debt threshold (in case of tax partnership) | - 6.800 | 2,47% | 168 |
| Return basis | 281.800 | 16.052 | |
| Tax-free assets (in case of tax partnership) | - 114.000 | ||
| Basis for savings and investments | 167.800 |
| Rate of return | 16.052 | / | 281.800 | = | 5,70% |
| Benefit from savings and investments | 167.800 | * | 5,7% | = | € 9.558 |
| Tax box 1 | 9.558 | * | 36% | = | 3.441 |
| Double taxation relief | -2.249 | ||||
| Total tax box 3 | 1.192 | ||||
| Return on foreign assets | 13.288 | - | 2.796 | = | 10.492 |
| Deductions taxed elsewhere | (10.492/16.052) | * | 3.441 | = | 2.249 |
The new ‘actual return box 3’ law is expected to come into force from 1 January 2027. For real estate, it provides that direct income is taxed, minus maintenance costs and interest paid. In addition, on sale, the capital gain realised is taxed. If the holiday home is not rented out, the income is set at 2.65% of the (WOZ) value. Against (approximately) 6% of the current bridging law. Several bodies have pointed out that the upcoming levy of 2.65% could be contrary to European law.
Conclusion
It can be concluded that when purchasing property abroad, one should think about income tax abroad, income tax in the Netherlands and VAT. For income tax abroad and VAT, please refer to an adviser in the relevant country.