Income tax on income from savings and investments is levied on a flat-rate basis under Box 3. The income is calculated on the basis of a flat-rate return of 4% of the market value of the positive balance of assets and liabilities. The Supreme Court has ruled that this flat-rate system is not unreasonable. Even where the return on certain assets is structurally lower than 4%, the Supreme Court considers that this does not constitute an unlawful infringement of the right to property. In the case of let properties, a low return will generally be reflected in the market value.
Since 2010, rented properties in box 3 have been assessed at their WOZ value. This refers to the value of a property as at 1 January of the previous year. This is a practical arrangement which does not infringe upon the right to undisturbed ownership of a property.
The WOZ value is based on full and unencumbered ownership of a property and does not take into account whether the property is let. For this reason, the value of a let property is set at a percentage of the WOZ value. This percentage is known as the vacancy value ratio. There is no provision for rebuttal.
There is a cumulation of flat-rate amounts. A flat-rate return is determined on the basis of a flat-rate value, which, in the case of let properties, is subject to a further flat-rate adjustment. The question is whether the outcome of this is what the legislator intended. According to the Supreme Court, this is not the case where the valuation of let properties is at least 10% higher than the actual value. In such a case, the value of a let property must be determined in accordance with the main rules of Box 3. This means that the actual market value of the let property must be determined as at the WOZ valuation reference date.
The Supreme Court has quashed a ruling by the Amsterdam Court of Appeal to the contrary. The Court of Appeal in The Hague must now give the owner of the let properties the opportunity to demonstrate that the market value of the let properties on the valuation date is lower than the flat-rate value set.