Arnhem-Leeuwarden Court of Appeal has ruled that income from a share in a owners’ association reserve must be assessed under Box 3 using the (low) rate of return applicable to bank deposits.
Box 3
Following the 2021 ‘Kerstarrest’ ruling, the Tax and Customs Administration determines the taxable flat-rate income from savings and investments (Box 3) on the basis of the flat-rate savings option (up to and including 2022 on the basis of the law, where this is more favourable). Under the flat-rate savings scheme, three categories of income are distinguished: 1. bank and savings balances, 2. other assets, and 3. debts. The flat-rate return on bank and savings balances for 2021 was 0.01% (this figure is not yet known for 2022). For other assets, the return for 2022 amounts to as much as 6.17%. It goes without saying that discussions have now arisen as to which assets should be classified as bank and savings balances. This makes a huge difference to the tax burden.
Bank and savings balances
On the face of it, it seems clear what bank and savings balances are: the amounts held in your bank and savings accounts. However, if you live in a block of flats and are a compulsory member of the Owners’ Association (VvE), that VvE holds funds in a bank account. For the purposes of income tax, these balances are attributed to and taxed in the names of the members of the VvE. These members do not have a balance in a bank or savings account, but rather a balance with (or a claim against) the VvE.
However, the Arnhem-Leeuwarden Court of Appeal is of the view that insufficient redress is provided when the notional return applicable to other assets is applied to the funds held by a owners’ association (on which the association receives virtually no interest from the bank). The Court therefore rules that the notional return applicable to bank and savings balances must be applied.
We are curious to see whether the Tax and Customs Administration will revise its position or refer the matter to the Supreme Court. On its website The Tax and Customs Administration states, amongst other things, the following:
“Other possessions include, amongst other things:
- your share in the assets of the ‘owners’ association’ (VvE) on 1 January of the year of the tax return
Are you a member of a owners’ association, for example because you own a flat in a block of flats? If so, you pay a contribution to the owners’ association to cover costs such as maintenance and cleaning. Through your membership, you also have a share in the owners’ association’s assets.“.
The ruling also provides grounds for other assets which, whilst not formally classified as bank or savings deposits, do yield returns based on those of the underlying bank or savings deposits, such as funds held in a notary’s third-party account.