In the Letter to Parliament: Tax Motions and Commitments On 17 September 2019, the State Secretary for Finance announced the flat-rate returns for Box III for 2020. These flat-rate returns are slightly lower than in 2019.
Box III
Income from savings and investments is taxed under Box III of the income tax system. For 2020, that income is determined on the basis of the balance of assets and liabilities in Box III as at 1 January 2020 (the return base). It is not the actual return achieved that is taxed. The income is determined on a flat-rate basis.
The tax-free allowance may be deducted on a return basis. In 2020, this deduction amounts to: € 30.846 (2019: € 30.360).
The weighting factors do not change:
- the portion of the tax base up to €72,797 is allocated to class I 67% and to class II 33%;
- of the base amount between €72,797 and €932,775 is allocated to class I 21% and to class II 79%;
- The portion of the tax base in excess of €932,775 is allocated to Class II for 100%.
Returns
Two return categories are used for the flat-rate returns. Return category I refers to the average savings return. For 2020, this is set at: 0,06% (2019: 0.13%. Return class II refers to the average return on other investments. This return is set at 5,33% (2019: 5,6%).
The flat-rate returns in Box III therefore amount to the following in 2020:
- up to €30,846: exempt;
- €30,846 to €103,643: 1,8% (2019: 1,94%);
- €103,643 to €1,036,418: 4,22% (2019: 4,45%);
- above €1,036,418: 5,33% (2019: 5,6%).
Box III 2.0
The Government has now announced the measures being considered to bring income in Box III more into line with the actual return achieved. The new rules are due to come into force in 2022. See our articles Investors will pay significantly more under the new Box III scheme and Savings of up to €440,000 are tax-free.