It might be a surprise, but parts of the Dutch tax system are based on fiction.
A subject that has been increasingly controversial – and which ended in a supreme court ruling late last year – is the ‘fictional income’ calculated for savings. Instead of taxing savings on the income they generate, the Dutch tax office has calculated a fictional return, and taxed this amount (at 31% this year).
Although there is a tax-free allowance, the highest Dutch court has ruled that this tax – which often overestimates the amount people actually make – is a breach of European human rights treaties.
The case that sparked the court battle dates back to 2017, and there is now a question of whether all ‘overpaid’ asset tax will be refunded, not just for people who took part in the mass claim. The Dutch tax office has said that for 2021, wealth will be taxed in line with the supreme court judgement. The government is will make a decision about what happens for previous years, by May 1.
“The plan is that from 2025 your assets – box 3 – are going to be taxed against their actual yield instead of a fictional yield,” explains a Blue Umbrella expert. “A high court decision says that people do not make a fictional yield of around 4% and that the Dutch government should adjust the law. The government has said it is going to change, but it will take some time.”
Due to the court ruling, the Dutch tax office is postponing almost all final decisions for tax years 2019 and 2020 where box 3 is involved. Decisions for previous years may also be postponed, although the tax office may send people a final decision and correct this afterwards. Blue Umbrella experts expect that the court judgement may be translated into practice sooner than 2025.
The junior finance minister mentioned in a statement at the beginning of this month that further decisions will possibly be made in the beginning of spring this year, on whether everyone with savings and assets above the box 3 threshold in 2017 and 2018 will be reimbursed and what will happen with the years after 2018. People who have the 30% ruling are unaffected, as their assets do not need to be declared in the Netherlands.
When you file a provisional income tax return for 2022, then all information regarding Box 3 is still obligated to declare. After you filed the provisional income tax return for 2022 it can possibly be a solution to make an objection against the outcome of the provisional income tax return for 2022 to prevent an unnecessary provisional payment for Box 3 in 2022.
The threshold for taxing assets is going to rise from just over €50,000 to €80,000 in 2023, meaning this first amount will not be taxed – a benefit for savers. Another adjustment may negatively affect people who rent out property. At the moment, it is possible to reduce the official valuation of the property (known as the WOZ-value) downwards, to reflect actual rental yield. However, this is due to change so the WOZ value will remain the same as for an unrented property.