Ahead of the debate on the Christmas holiday With regard to Box 3, the Ministry of Finance has issued a number of recommendations published a report on the possible resolution.
Formalities
This concerns recommendations from the State Solicitor regarding a number of formalities. It was already clear that a decision on the mass appeal must be issued within six weeks. However, that decision may be fairly brief. Subsequently, the tax assessments against which a valid appeal has been lodged must be reduced within six months.
With regard to the (many) tax assessments against which no objection was lodged, or no objection was lodged in time, concludes The State Solicitor states that the question of whether these tax assessments should be reduced ex officio must be taken into account in a political and administrative assessment. The opinion sets out a number of arguments in favour of reducing these tax assessments ex officio.
Actual return
In the advice From the views of three external experts, we can already get a glimpse of how compensation for any excess Box 3 tax paid will be arranged. After all, it is clear that compensation does not mean that everyone who has paid Box 3 tax will have this tax refunded.
In their advice, the experts adhere as closely as possible to the principles of Box 3. In doing so, they note that the Supreme Court has stated that compensation aimed at restoring legal rights must be determined on the basis of reasonableness.
Changes in capital value, whether realised or unrealised, must be included in the actual return achieved. However, Box 3 does not provide for the possibility of offsetting negative changes in capital value against positive ones across the end of the financial year. It is noteworthy that the advice is to submit the proposed policy to the Tax Court as soon as possible under a new procedure.
The actual return is not determined for each individual asset, but for the assets in box 3 as a whole. The experts give the following example: “Suppose a taxpayer holds shares worth €500,000 and savings totalling €200,000, and that in 2018 he realised a return of €30,000 on the shares and none on his savings. Taking into account an allowance of €30,000 and in accordance with the Box 3 rules, he will have to include income of €27,348 from his assets. He is therefore not eligible for compensation. The shortfall in returns on his savings is offset by the excess return on his shares.”.
The costs of acquiring, collecting and maintaining the returns actually achieved are taken into account for the purposes of compensation. This also includes financing costs. The costs of acquiring and maintaining the source are not taken into account.
Wait and see
We are eagerly awaiting to see what the Treasury will ultimately propose and how the court will ultimately rule on the matter.