The subject of Box 3 has been in the news a lot lately, resulting in a lot of questions. A number of changes are expected to be announced again when the Tax Plan 2024 is presented. In anticipation of new announcements, we list the most important issues here.
How was it again?
In the December 2021 Christmas ruling, the Supreme Court drew a line under the method of taxation in Box 3. The Supreme Court ruled that the taxation is inconsistent with the actual returns achieved and thus violates the concept of ownership from the European Convention on Human Rights. Secretary of State Van Rij has introduced recovery legislation to fix the effects of the Christmas ruling. The remedial legislation for Box 3 applies to all years starting in 2017 and is also known as the "lump-sum savings variant.
At the beginning of the year 2023 it was mentioned that from 2026 the Box 3 tax would be calculated on the actually realized return. This date has since been postponed to Jan. 1, 2027, according to the latest letter from the secretary of state. Now that the Cabinet is outgoing, further delays are expected.
In this blog, you will read how the "lump-sum savings alternative works out for taxation in 2023 and we provide insight into what options are available for the new Box 3 legislation.
Elaboration of lump-sum savings variant
In the flat-rate savings variant, a notional return is calculated for each category. This considers how many assets were present in a given category on January 1 of the tax year in question. There are now two categories: "bank deposits" and "other assets. Bank balances include bank deposits. This includes a share in the reserve fund of an Owners' Association and amounts in the notary's trust account. All other assets such as: investments, real estate and loans granted from private sources, qualify as other assets. Incidentally, this does not apply to mutual debts between spouses and between parents and minor children. These debts are defiscalized and thus excluded from the Box-3 capital. Another important element is that debts can no longer be fully offset against the total capital.
The Secretary of State has set the following returns for 2023.
| Power type | Percentage |
| Bank balances | 0,92% |
| Other power | 6,17% |
| Debts | 2,57% |
The rate in Box 3 will be increased by 1% points per year in 2023 through 2025.
| 2023 | 2024 | 2025 | |
| Rate | 32% | 33% | 34% |
The consequence of the new method is that other assets in Box 3 are significantly more heavily
is taxed than bank deposits. For other assets, there is an effective pressure
of approximately 2%.
Legal Restoration Decree (2017 - 2021).
Legal redress is automatically granted if the new calculated flat rate
return is lower than the original calculated flat rate of return. This
applies to income tax returns up to and including tax year 2021
that were not yet irrevocably fixed as of Dec. 31, 2021.
If this was/is applicable to your situation, you have probably already received notice here
about it from the Internal Revenue Service.
Legal Restoration Decree 2022
For the 2022 income tax return, the capital gains tax may be calculated based on the new methodology if it is more favorable. This is the case if your assets consisted predominantly of savings on January 1, 2022.
If you have your income tax return prepared by Habermehl, choose
we automatically choose the most favorable method for you. The year 2022 is the last
year that this is possible. For 2023, the previously mentioned rates will apply.
Preliminary assessment 2023
The Tax Office has calculated the preliminary assessment 2023 based on the new method. It is possible that after the end of the tax year, it turns out that the levy in Box 3 does not match the return actually achieved. It is therefore questionable to what extent this new calculation method honors the Supreme Court ruling. Objections can be made, but only from the moment the 2023 income tax assessment is finally imposed. If you want to take advantage of this possibility, we would like to hear from you. This is not expected to be possible until the second half of 2024.
Box 3 expectations from 2027 onward
The goal is to align the levy on wealth in Box 3 with actual returns from 2027. There are now two options for this:
- A capital gains tax (tax on returns including unrealized
value changes) or; - A capital gains tax (realized only). A third possibility would be a
be refinement of the lump-sum savings variant.
Capital gains tax
In a capital gains tax, tax is levied annually on regular income such as: interest, dividends and rent. In addition, changes in the value of assets are taxed at the time the asset is sold. Tax is then levied on the difference between the purchase and sale price. A capital gain can also be negative, which can result in a loss in Box 3. Although this method seems to fit with the desire to levy according to actual returns, it does require a lot of administration. In addition, a disadvantage, according to the Ministry of Finance, is that it is more difficult for the tax authorities to administer the pre-completed return.
Capital gains tax
A capital gains tax is levied annually on the regular income as well as on the unrealized value development of assets that have occurred in the tax year. Examples are a rising share price or a higher WOZ value of an investment property. The challenge with this method is that it creates a cash-out situation without direct income. With this method it is possible for the tax authorities to collect more information for the pre-completed tax return.
Earlier, a preference was expressed by the Cabinet for the capital gains tax. With this method, there would be a more constant tax revenue. But now that the cabinet is outgoing, the question arises as to what choice a subsequent cabinet will make.
Owner-occupied home not to Box 3
Something where certainty has been given is the allocation of owner-occupied housing. Given
developments and the complicated reforms of Box 3, it is according to the
Secretary of State not logical and unrealistic to put owner-occupied housing in Box 3 in the short term.
It still seems far away but, starting in 2031, it may occur that the maximum term for the mortgage interest deduction has expired (30 years after the measure was introduced).
The home equity debt then automatically moves to Box 3. Whether by then the
position on owner-occupancy is different, it remains to be seen.
Author: mr. M. Doves-Bierman
This blog is written as of August 2023.
This blog is for general information only and does not claim completeness. The content is not tax advice. If you would like personal advice, please contact your relationship manager. The attorney general of the Supreme Court has issued an opinion regarding the new calculation method of the "Legal Restoration Decree. The Solicitor General has concluded that the restoration operation still violates the prohibition of discrimination and property rights. Although the new method is suitable for savers, it does not fit well with investors. The attorney general argues that unfortunate investors still pay too much tax, while particularly successful investors still pay too little tax. If the Supreme Court follows the opinion, which is common practice, taxpayers who took advantage of the taxation under the Legal Restoration Decree may be able to reclaim income tax through an appeal process. The Supreme Court's ruling is expected in about six months.
