‘That’s been common knowledge for ages, you might think?’ Yet it was raised once again before the Supreme Court, following an amendment to the Civil Code.
Homeowners’ Association
VvE stands for Vereniging van Eigenaars (Owners’ Association). Where there are several residential or commercial units (flats) in the same building, the owners of those flats must form a VvE to manage matters that require joint action. Every flat owner is automatically a member of the VvE. This is regulated in Article 5:124 and subsequent provisions of the Civil Code.
The flat owners are required to pay a contribution to the Owners’ Association. To the extent that this contribution is not used to cover the annual costs, the Owners’ Association maintains a reserve fund. Non-annual costs are covered from this reserve fund. The Owners’ Association must hold the reserve fund in separate current or savings accounts in the name of the Owners’ Association.
Box 3
With regard to the flat owner’s share in those assets, the Supreme Court had already ruled in 2010 that it is a capital asset that must be declared in Box 3 (income from savings and investments) and does not form part of the owner-occupied home taxed in Box 1. In the recent judgement, this question was once again referred to the Supreme Court because the Civil Code was amended with effect from 1 January 2018, stipulating that the reserve fund of a VvE is a statutory provision which cannot be counted as part of the VvE’s equity, or that no market value can be attributed to it. However, the Supreme Court confirms that the share in a VvE’s reserve fund is taxed in full under Box 3.
Incidentally, Arnhem-Leeuwarden Court of Appeal It was recently decided that a share in a homeowners’ association’s bank balance should be reported as a bank balance in Box 3, rather than as other assets. The significance of this, under the flat-rate savings scheme, is that a considerably lower flat-rate return is calculated on bank balances than on other assets. In the 2023 Spring Memorandum, the Government states that a share in the assets of a VvE will be classified under the category of bank balances.