Netherlands: Changes to proposal for new “Box 3” (wealth tax) regime as of 2027

The caretaker government has made changes to five aspects of the draft bill for the new “Box 3” (wealth tax) regime to replace the current regime. The changes were introduced in response to last year’s internet consultation on the draft bill. 

Background

The Dutch Supreme Court (Hoge Raad) in December 2021 held that the current Box 3 tax regime for the years 2017-2022 was contrary to the European Convention on Human Rights (ECHR).

The general rule of the new regime is that taxation of assets that fall in Box 3 is based on the actual return on investment realized by the taxpayer on those assets. The draft bill does not specify what the new flat Box 3 rate will be; in the explanatory notes, budgetary impacts are calculated at rates of 33%, 35% and 37%.

A number of exceptions or nuances are provided to the general rule—relating in particular to the obligation to make an annual revaluation to fair market value—depending on the nature of the assets in question.

Main features of the changes

In response to an internet consultation held last year, technical improvements have been made to the proposal for the new Box 3 regime. The changes mean that:

• The flat rate for the first home in Box 3 will be canceled. All homes falling in Box 3 would thus be taxed in accordance with capital gains tax.
• The option to set off a Box 3 loss against Box 3 profits from older years would end (no carried-back loss set off).
• When the new Box 3 regime comes into effect, any property and shares in a family business or an innovative start-up or scale-up already owned by a taxpayer would be valued at the WOZ value or the fair market value respectively.
• The price paid for a right of enjoyment would be deducted in installments (rather than all at once) in the years in which there is a right of enjoyment.
• The foreign exchange gains or losses on bank balances in foreign currencies would be taken into account when determining the return on investment.

Next steps

According to the caretaker government, the draft bill is a building block and tool for a new government, and it is up to a new government to take a final decision on the bill.

In order to keep to the effective date of January 1, 2027, the bill must be presented to the Lower House of Parliament in the summer of 2024 and the lower house must adopt it before March 15, 2025.

Read a February 2024 report prepared by the KPMG member firm in the Netherlands