Various news outlets are reporting that people with a holiday home (or small holiday home) abroad may need to lodge an objection to their income tax assessment(s). This follows a statement from Grant Thornton announcing that they have initiated test litigation.
What's going on?
We explained what this is all about in our article Higher tax on holiday homes abroad as demonstrated by a simple calculation. The tax disadvantage, which is already being referred to in the press as “holiday home tax“, amounts to just €330 in this example.
Naturally, you will need to work out for your specific situation how much income tax you will pay in the Netherlands from 2017 onwards on your holiday home abroad. In many cases, this will be limited to a maximum of a few hundred euros. Only if you have a substantial taxable amount in Box 3 (income from savings and investments) – say, €1,000,000 or more – and the foreign holiday home is of considerable value will the amount exceed €1,000.
If your holiday home has been financed with a loan, you must deduct the loan from the value of the property. This is because the tax deduction for other purposes is calculated on the basis of the balance. As a result, your tax liability is lower.
Incidentally, it does not necessarily have to be a holiday home. The issue applies to all property located outside the Netherlands that is taxed under Box 3 for income tax purposes.
Reservation of rights
Naturally, everyone would like to get a piece of the pie should the test case yield a favourable outcome for taxpayers. But to do so, you must have lodged an objection to your final income tax assessment in good time. This can be done with a simple letter. You simply need to state which assessment you are objecting to and the general grounds for your objection. This is also referred to as a pro forma notice of objection or notice to preserve rights.
The amended method for calculating the flat-rate return in Box 3 came into force on 1 January 2017. The 2017 income tax and national insurance contributions assessment is therefore the first to address this issue. Many of these assessments are already final at this stage. This is the case where six (or more) weeks have elapsed since the date of the final assessment without a legally valid objection having been lodged against it. In such cases, there is no point in submitting a pro forma objection at this stage.
The Tax and Customs Administration is already busy issuing final income tax assessments for 2018. However, for most of these assessments, the deadline for lodging an objection will not quite have passed yet.
What does the Tax and Customs Administration do?
It is well known that the Tax and Customs Administration is not particularly keen on accepting appeals for consideration. Accepting an appeal for consideration means that the Tax and Customs Administration agrees that you do not yet need to provide further grounds for your appeal, but should await the outcome of ongoing proceedings. If the Tax and Customs Administration is not prepared to suspend your objection, there is little you can do about it. If you still wish to safeguard your rights, you will need to provide grounds for your objection. Should your objection be rejected, you will need to appeal to the tax court.
If the number of objections is sufficiently high, the Tax and Customs Administration will declare the mass objection procedure to be applicable. PLEASE NOTE: even in that case, you must still lodge a (pro forma) objection in good time for each individual tax year in order to safeguard your rights.
Need help?
VWG would be happy to help you calculate the tax loss you have incurred since 2017 in relation to your holiday home abroad. And, if necessary, we would of course be happy to lodge a pro forma objection to the tax assessment(s) on your behalf.
In all honesty, however, we must point out that, for the time being, we do not consider the trial proceedings to have a very high chance of success.