Children cost money, even if they have money of their own. When completing the income tax return, the savings of minor children must be included in the parents’ Box 3.
Minor children
Assets such as savings, investments and a second home all qualify as Box 3 assets. These assets must be declared in the income tax return. Parents of minor children must also include their children’s savings accounts in their income tax return. If, in addition to savings, the child also has other assets, such as investments, these must also be included in the parent’s income tax return.
The ruling
As recently as Supreme Court litigation was brought on this matter. In this case, the taxpayer had argued that it was unjust that his children’s assets should be included in the calculation of the Box 3 tax he owed. The Court of Appeal concluded that attributing the assets of minor children to the parent exercising parental authority over them did not constitute unlawful discrimination. The Supreme Court declared the taxpayer’s appeal in cassation unfounded without giving further reasons.
The Court of Appeal’s ruling concerns the appeal in the case of a ruling from the Zeeland West Brabant District Court. In this case, the court ruled that the legislature’s decision to tax the passive income of minor children through their parents is not entirely without reason. Read more about the ruling and about active and passive income in our article here Savings and investments of minor children
The Box 3 levy
No income tax is payable on actual income from capital, such as interest on savings, dividends on shares or rental income. In Box 3, it is not the actual income that is taxed, but a flat-rate calculated income. The tax due on this income is levied on a progressive basis. If you would like to know more about Box 3 income and taxation, please click here: Progress in Box 3 as well
In the judgment of 8 January 2021, the taxpayer also argued that the capital gains tax under Box 3 was contrary to European law. According to the Court, there was no question of an individual and excessive burden. We have written about this excessive burden on several occasions; see here: Supreme Court rejects flat-rate return under Box 3 . For example, the Supreme Court ruled that taxpayers faced an excessive burden in 2013 and 2014. The Supreme Court is not intervening but is leaving it to the legislature to amend the law on this point.
Tax-free allowance for 2020 and 2021
The 2020 income tax return will need to be completed shortly. The tax-free allowance is €30,846 if you do not have a tax partner, and €61,692 if you do. For 2021, these amounts are €50,000 and €100,000.