The basis for calculating returns under Box 3 (income from savings and investments) consists of the balance of your assets minus your liabilities.
It’s definitely worth the effort
If this balance is positive (the value of your assets exceeds the value of your debts) and exceeds the tax-free allowance (€25,000 per tax partner in 2017), a flat-rate return calculated. You’ll pay 30% income tax on that return. It’s definitely worth checking carefully to make sure you haven’t overlooked any Box 3 liabilities.
However, the return base in Box 3 is also used for the healthcare allowance. And if you pay a personal contribution towards healthcare, the assets in Box 3 are usually taken into account for this as well. This is another reason to check carefully that you are not declaring an excessively high return base in Box 3.
Debts
What exactly is meant by ‘debts’ in the context of Box 3? The Income Tax Act 2001 defines debts as liabilities with a market value. The North Netherlands District Court recently ruled that a potential future debt could not be deducted under Box 3. It was unclear whether, and to what extent, the debts would actually arise. The case concerned the future personal contribution payable under the AWBZ/Wzl for a stay in a care home.
The market value will often be equal to the nominal value of the debt. After all, your obligation to repay the debt almost always covers the full nominal value.
A lower market value may, for example, arise in the case of interest-free or low-interest loans.
First, look at boxes 1 and 2
You may only deduct your debts in Box 3 if they do not fall under Box 1 or Box 2. Box 1 includes, amongst other things, debts relating to your (for tax purposes) owner-occupied home and debts relating to assets made available to your private limited company. If you have paid for or fully paid up the shares in your private limited company using a loan, you must include the loan in box 2.
Box 3 covers all debts that do not fall under Box 1 or 2. It is not necessary for the debts to have been used to finance assets that are taxed under Box 3. You may also deduct purely consumer debts in Box 3.
In boxes 1 and 2, you do not deduct the debt itself, but rather the interest paid on the debt during the tax year.
Threshold
The first €3,000 (€6,000 for tax partners) of debts is excluded from Box 3. This threshold was introduced to prevent the tax authorities from having to verify the accuracy of small amounts of debt.
Tax arrears
You may not deduct your tax liabilities from the tax base for Box 3. The law explicitly excludes these liabilities. The only exception (i.e. those that are deductible) are liabilities relating to inheritance tax (including tax and collection interest). You pay inheritance tax if you receive an inheritance or bequest following someone’s death. You may also deduct debts relating to foreign taxes, which are comparable to our inheritance tax, in Box 3.
If you submit a request in good time for a provisional assessment to be issued for other taxes, but the Tax and Customs Administration does not respond quickly enough, you will be permitted to deduct the tax liability anyway. If the provisional assessment is issued on time, you must ensure that you actually pay the tax before the reference date for Box 3. The tax will then not form part of your assets to be declared in Box 3 on the reference date.
The following are also not classified as debt for the purposes of Box 3:
- current instalments of interest, rent or lease payments, in so far as these relate to a term of more than one year;
- the (present value of) liabilities relating to (regular) gifts, (child) maintenance and other obligations or benefits in kind which may be deductible annually under Box 1;
- most debts arising in connection with the settlement of the estate of the parent who dies first (please note the exceptions).