“Box 3” adjustment

The Junior Finance Minister in a recent letter to the Lower House has set out his “Box 3” adjustment proposal, the central plank of which is that tax on savings is to be determined in future on the basis of the actual amount in savings. Credit interest at a predetermined rate, which should be in line with the actual interest on savings (which would currently amount to a rate of no more than 0.09 percent per annum), is deemed to be accrued by savings. The proposal introduces a tax-exempt income of 400 euros, which in conjunction with said interest rate of 0.09 percent would render savings of up to 440,000 euros tax-exempt. The tax-exempt level of assets of 30,000 euros or so is to be retained, albeit that the new system is to be based on aggregate assets rather than assets less liabilities, as is currently the case. Another difference with the current regime is that all assets will be liable for tax when the tax-exempt level of assets is exceeded. Assets not being savings are currently being deemed to have a fixed-rate yield of 5.33 percent based on current rates of return, whereas liabilities are deemed to have a fixed-rate yield of minus 3.03 percent. The resultant income from savings and investments is reduced by the tax-exempt income and the surplus is taxed.

It is expected that 1.35 million or so Dutch tax payers will no longer be having to pay “Box 3” taxes if and when the proposal is adopted, while just under 500,000 tax payers will be paying fewer taxes. Small-scale investors who currently do not have to pay tax on their investments as these do not exceed the exemption threshold will not be taxed under the new system either. Then again, those who will continue to pay “Box 3” taxes will be charged at the higher rate of approximately 33 percent.

The proposal is to be worked up into draft legislation for submission to the Lower House before the latter rises for summer recess next year. The new system should take effect on the first of January 2022.

Dutch version: Aanpassing box 3