On 19 May 2025, the bill “Actual return box 3 law” submitted to Parliament. Intended effective date: 1 January 2028. How will real estate be taxed in this bill?
Actual return on property
As the name of the bill suggests, actual returns will be taxed. In the bill, this is done on the basis of a so-called capital gains tax. But it deviates from that for real estate by applying a capital gains tax. This means that unrealised capital gains on real estate will not be taxed in the interim.
3 situations
The bill distinguishes three situations for determining the actual return on property in the following:
- property rented all year (90% or more of the year);
- real estate that has not been let all year;
- property let for less than 90% of the year.
Rented all year
When the property has been let for 328 (in a leap year 329) or more days, the actual rental income is taxed annually. Actual rental income includes, in addition to the bare rent, fees for utilities, service charges and energy performance fees. Besides rent, there may also be rental income or other usage fees.
Maintenance and other periodic costs may be deducted from the actual rental income. Improvement costs are taken into account in determining capital gains (see below).
Not rented
If the property has not been let for the entire year, income is determined at 3.35% of the value of the property (this addition rate is set for 5 years). This is referred to as the property allowance. In addition to the property addition, actually realised income (e.g. rent for the short period in which it was rented out) is not included in income.
The property addition will not be taken into account for the period when the property is under construction because no actual use of the property can be made then. Situations will still be formulated, which will be equated to real estate under construction, such as when the real estate is uninhabitable due to fire or a major renovation.
Mixed use
When the property is leased for less than 90% of the year, it is taxed annually the higher of:
- the rental income or;
- the property addition.
In the parliamentary explanation of the bill, we find the following example.
Alex owns a property with a WOZ value of €300,000. In 2028, he rents the house for six months, with a rental income of €15,000. Maintenance costs are €2,000 and improvement costs €4,000.
The property addition for 2028 is: 3.35% * €300,000 = €10,050. This is less than the rental income (€15,000). The income in box 3 is therefore €15,000, less the maintenance costs of €2,000. Improvement costs are not deductible, but are taken into account when capital gains are determined when the property is sold.
Power gain
As mentioned, (unrealised) capital gains on property are not taxed annually. However, once the capital gain is realised, it is taxed. Capital gains are realised, for example, when the property is sold or when the property is moved from Box 3 to Box 1.
This concerns value development from 1 January 2028 (the effective date of the bill). For residential properties, the value development is based on the WOZ value. In the case of other real estate, it will be the market value. The costs of improving the property may be taken into account when determining the capital gain (obviously to the extent these costs were incurred after 1 January 2028). The costs of improvement will then obviously have to be proved at the time the capital gain is realised.
Until 1 January 2028
The new legislation is scheduled to come into force on 1 January 2028. Of course, whether that date is met depends on the pace at which the House and Senate deal with it.
Until 1 January 2028, there is a choice of least bad of:
- income determined on the basis of the flat rate;
- with the possibility of providing rebuttal evidence that the actual return achieved is lower than the flat rate.
The flat rate for assets other than bank deposits has been provisionally set at 5.88% for 2025 (the final flat rate will be set in early 2026 based on actual returns in 2025). There are plans to increase the flat rate for 2026 by 1.9% points (for budgetary reasons). This would amount (for now) to a flat rate of: 5.88% + 1.9% = 7.78%.
An important difference for real estate with the scheme to be introduced as of 2028 is that the counter evidence up to and including 2027 WILL take into account (un)realised increases in the value of the real estate and NOT costs.