The VEB has announced to initiate legal proceedings regarding the rate at which investments in Box 3 will be taxed in 2022.
Actual return
The Supreme Court’s ruling in the 2021 ‘Kerst’ case appears clear: income from savings and investments must not be set at a level higher than the actual return. For 2022, the Tax and Customs Administration is applying three flat-rate returns:
- for bank balances: 0,01% (2023: 0.36%; provisional figure)
- for other possessions: 5,53% (2023: 6,17%)
- for debts: -/- 2,46% (2023: 2,57%; provisional figure)
The Dutch Central Bank (DNB) has calculated that, in 2022, Dutch households suffered an average capital loss of 14% on their investments. As a result, the actual return appears to be considerably lower than the notional income subject to income tax.
Opportunities
Whether the test case will be successful is by no means certain at this stage. In its ‘Kerst’ judgement, the Supreme Court did not rule on what exactly should be included under the actual return. In the case of investments, this raises the question of whether only income actually derived from the investments (interest and dividends) should be included. Or whether the increase and decrease in the value of the portfolio (and how this should be calculated) should also be included, and how this should be dealt with across different years (loss set-off?). Another question is whether (management) costs of investment portfolios should be deducted from the actual return subject to the maximum tax.
Join in
Anyone wishing to benefit from a favourable outcome of the test case must lodge an objection to the final income tax and national insurance contributions assessment in good time. For 2022, these assessments have yet to be issued (the tax return campaign only began recently – on 1 March 2023). A timely objection must be lodged within 6 weeks of the date of the assessment. For the sake of completeness, it should be noted once again that the declaration that the mass objection procedure applies does not mean that those who have not lodged an objection will also be included in the restoration of legal rights following a positive outcome of any proceedings.