The recent developments surrounding the box 3 rulings have got many taxpayers in the Netherlands thinking. The Supreme Court rulings and subsequent measures have far-reaching consequences for savers and investors. In this article, we discuss what you, as a taxpayer, should do in response to these rulings and how you can adapt your financial situation to the new reality.
What are the box 3 judgements?
Box 3 is about taxing income from assets. This includes savings, investments, receivables and second homes. In 2021 and 2024, the Supreme Court issued rulings ruling that the way the Tax Administration calculates the return on assets in Box 3 is not in line with the European Convention on Human Rights (ECHR). The crux of the problem lies in the fact that the notional returns used by the Inland Revenue could be higher than the actual returns realised by taxpayers on their assets.
What are the implications of the judgments?
The government has been forced to overhaul the Box 3 system and introduce compensation schemes for taxpayers who have been disproportionately taxed. The government has announced that there will be a new system, where the actual return is taxed instead of a notional return. This new system is not expected to be fully implemented for several years (probably from 2027). In the meantime, temporary arrangements are being made to accommodate taxpayers.
What should you do now?
1. File objections to recent final assessments
If you disagree with final tax assessments you have recently received, you can file an objection. The time limit for this is short (6 weeks), so make sure you do it on time. For quite some time, the tax authorities have not imposed final tax assessments, except when they do not include income in box 3 or only income from bank deposits. The latter assessments must be objected to within six weeks, but do weigh the costs to be incurred against the maximum tax reduction to be realised. Provisional assessments cannot be objected to by law.
2. Take stock of the actual return on your assets
The Inland Revenue has announced to ask, by means of a (digital?) form, what are the actual returns you believe should be taken into account when imposing final income tax assessments. It is prudent to wait for this form before taking action against the Tax Office.
Of course, you must be able to substantiate the actual return stated in the form. With this in mind, you can then take stock of the actual return you have realised with your assets in the various years. Do take into account some of the instructions the Supreme Court gave for this in the 6 and 13 June judgments (see our articles Supreme Court rejects flat-rate levy box 3 and More rulings on box 3).
3. Consider restructuring your assets
With the changes announced, it may be wise to re-structure your assets. This could mean, for example, investing more in products that are treated more favourably under the new rules, or instead deploying your savings differently. It may make sense to transfer part of your assets to a private limited company (or other legal entity).
Conclusion
The box 3 judgments can have a big impact on your tax position. But on the other hand, due to the Supreme Court's instructions on how to determine the actual return, this could also be disappointing. In any case, no more income is ever taxed than the fixed return determined under the applicable law.