The year 2019 is already just around the corner. This also marks the start of a new tax year. Income tax will then be levied on the value of assets as at 1 January 2019. To avoid or reduce this tax on assets in box 3, assets must be withdrawn from box 3 before this reference date.
Court of Appeal of ‘s-Hertogenbosch
The Court of Appeal in ’s-Hertogenbosch recently handed down a judgement in a case where an asset holder had withdrawn assets from Box 3 prior to the reference date of 1 January.
The case is as follows. On 31 December 2012, the man incorporated a private limited company (BV). On the same day, he paid a sum of €1.5 million into the notary’s escrow account as a share premium. On 31 January 2013, the notary transferred the amount from the escrow account to the company’s bank account.
The verdict
The tax inspector has amended the man’s 2013 income tax return. The inspector takes the view that the share premium payment had not yet been removed from the man’s assets as at 1 January 2013. In his opinion, there was no obligation to pay the share premium. After all, there was no memorandum of association or agreement setting out this obligation to pay share premium.
The Court upholds the inspector’s position. The Court is of the opinion that the person who has paid funds into a notary’s escrow account must be regarded as the rightful owner of those funds. Merely transferring the funds to the notary’s escrow account is not sufficient for them to cease to form part of the man’s estate.
No abuse of the law
In this case, the asset owner was therefore unable to reduce his Box 3 assets as at the reference date. This would probably have been possible if the share premium payment had been recorded in the minutes of a general meeting of the company, held before the reference date, and the money had been paid into the private limited company’s bank account.
After all, the court has previously ruled in the same case that it does not constitute an abuse of the law (fraus legis) to place your money in a private limited company in order to save on tax. Not even if you do so at the very last moment. We describe this ruling in our article At the last minute, out of Box 3 and into the private limited company.
Other ways to reduce costs
As well as the option of transferring Box 3 assets into a private limited company, there are other ways to reduce the value of Box 3 assets. For example, you can pay off your mortgage (debt on your own home). You could also, for instance, make gifts of money to your children and grandchildren. Don’t forget to declare this. You can find information about the tax return and the exemption in our factsheet. Gift tax return.
Tax-free assets
Fortunately, you don’t have to spend all your money before the end of the year. Under Box 3 of the income tax system, there is a tax-free allowance. The tax-free allowance for 2019 is € 30.360. For tax partners, the tax-free allowance is € 60.720. If the value of your assets exceeds the tax-free allowance, tax is payable. The capital gains tax rate increases as the value of your Box 3 assets rises. You can find more information about the taxation of Box 3 assets in 2019 in our article Box 3 returns for 2019.