State Secretary for Finance Vijlbrief recently announced that the plans to amend the income tax levied on income from savings and investments (Box 3) cancelled. He is set to announce new plans on Prinsjesdag.
Box 3
In Box 3, income from savings and investments is taxed. This is done by determining a flat-rate return based on the value of the assets falling within Box 3. Income tax is payable at a rate of 30% on this flat-rate return.
Box 3 covers all assets that are not taxed under Box 1 or Box 2. For most people, this includes savings, investments and property that is not used in, nor made available to, their own business.
Supreme Court
The Supreme Court has now ruled on several occasions that the flat-rate system is unacceptable. However, our highest tax court still leaves it to the legislator to provide redress. It was in this context that the proposal, which has now been scrapped, was put forward. For those wishing to read up on how the scrapped scheme worked, we refer you to our articles: Investors will pay significantly more under the new Box 3 and Savings of up to €440,000 are tax-free.
The fact that the flat-rate system is unfair is abundantly clear when it comes to savings balances. It is common knowledge that banks have for some time now been paying (virtually) no interest on these accounts. For Box 3, however, a flat-rate return of up to 5.33% (!) is still applied.
Lodging a pro forma objection
For each tax year, a (test case) is now being brought before the Supreme Court concerning Box 3. If the legislature fails to act swiftly enough, the Supreme Court could at some point decide to ensure the required restoration of legal rights itself. Taxpayers who wish to join this process would be well advised to safeguard their rights by submitting a pro forma objection in good time. See also our article Are you going to lodge another objection to Box 3 for 2019 as well?.
Financial planning
Many financial plans had already taken into account the proposed – but now scrapped – new system for Box 3. These plans will, of course, need to be revised. This will have to wait until Vijlbrief announces his new plans.
Incidentally, it seems most likely that these new plans will not be too far-reaching in the short term, but will simply involve increasing the existing tax-free allowances. It has been suggested that the tax-free allowance, which stands at €30,846 per taxpayer in 2020, should be increased to, for example, €50,000.
For Box 3, the reference date is the first day of the calendar year. The next reference date is therefore 1 January 2021. Given the (limited) time remaining until that date, far-reaching changes are not advisable.