If you have a home, which belongs to your income from savings and investments (box 3), you must value it at the WOZ value.
Which box?
A home, which is your private property, is subject to income tax in Box 3 if it does not belong to Box 1. To box 1 belongs the home you:
- main residence (for tax purposes, this is your “own home”);
- included in your company's assets.
In box 3, income tax is calculated on a fixed return. That return is calculated on the value of possessions less debts in box 3. The actual return earned from your home is not important.
WOZ value
The WOZ value of your home(s) is determined each year by the municipality in which the property is located. It is the market value in freehold condition. The WOZ value of homes is determined by comparing with what was paid for recently sold homes.
In two situations, a lower value than the WOZ value of your property may be used:
- It concerns a property on which the rent protection rules apply;
- the property is leased under a lease for at least 12 years.
In these situations, you may value the property for income tax purposes in Box 3 by multiplying the WOZ value by the vacant value ratio.
Empty value ratio
The vacancy rate depends on the amount of rent. If the rent is €500 per month and the WOZ value is €150,000, the rent is 4% of the WOZ value. The vacant value ratio is then 62% (see table below). The property should then be accounted for in Box 3 for a value of: 62% * €150,000 = € 93.000.
Table vacancy rate
| Rent as a percentage of the WOZ value | ||
| More over: | No more than: | Empty value ratio |
| 0% | 1% | 45% |
| 1% | 2% | 51% |
| 2% | 3% | 56% |
| 3% | 4% | 62% |
| 4% | 5% | 67% |
| 5% | 6% | 73% |
| 6% | 7% | 78% |
| 7% | 85% | |
The annual rent to be considered under the vacancy ratio is equal to 12 times the monthly rent at the beginning of the calendar year (rent increases during the year are irrelevant). This is the “bare rent”. That is the rent excluding fees for energy, water, upholstery, contents and the like.
A lower value, than the value after applying the vacant value ratio, may be used if the outcome based on the vacant value ratio differs 10% or more from the actual value on the reference date for the WOZ. The Supreme Court ruled in 2015 that then the fair market value of the property in let condition may be used.
Symbolic rent
If the tenant is a related party (e.g. family), it should be assessed whether the tenant pays an arm's length rent. If not, the rental income should be set at 3.5% of the WOZ value. The vacant value ratio is then 62%.
The Zeeland-West Brabant District Court rules that a €1 rent is merely symbolic. The void value ratio may not be applied then. The property must be included in Box 3 for the full WOZ value.
Leasehold
If you are a leaseholder of the property, you may deduct the capitalised value of the annual leasehold canon from the WOZ value.
Foreign residence
A foreign home must also be processed at the WOZ value in Box 3. This is not possible because the WOZ value is only determined in the Netherlands. Therefore, the fair market value must be determined for a foreign home.
Usually, by the way, this does not matter because under international tax law, the levy of income tax is allocated to the country where the residence is located. The foreign home will then be included in box 3 in the Netherlands. But the double taxation relief ensures that, on balance, you pay no income tax on it.