New box 3 plans: tax on paper profits puts pressure on wealth and legal certainty
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New box 3 plans: tax on paper profits puts pressure on wealth and legal certainty
The now outgoing administration wants to switch to a new Box 3 system by 2028 in which a notional return is no longer taxed, but the actual return on assets. Sounds logical, but the proposal has fundamental objections. In this blog, we explain why, in practice, this plan entails major risks for entrepreneurs and investors.
What does the bill entail?
At the heart of the bill is the introduction of a capital gains tax. This means paying annual taxes on both direct income such as interest, rent and dividends, and on the annual appreciation of assets such as stocks and crypto. Even if that increase in value has not yet been realized. Only for certain assets, such as real estate and start-ups, is there an exception. There, tax is levied only upon sale.
The new system thus becomes a hybrid model: tax on accretion on the one hand, and on realized gains on the other.
In addition, the current tax-free wealth will be replaced by an exempt return of 1,800 euros per person. It also allows loss relief between years, and increases the tax rate to 36 percent.
Our objections
Although the proposal seems fairer on paper than the current system, in practice we see significant drawbacks:
1. Liquidity problems
Taxing paper gains means that people have to cough up money that they have not actually received yet. Especially with unlisted investments or long-term investments, this can lead to forced sales purely to meet the tax obligation.
2. Complexity and implementation problems
The Tax Authorities have already indicated that this proposal has far-reaching consequences for their systems and processes. The Council of State calls the proposal too complex and poorly implementable. This increases the chances of errors, delays and lawsuits.
3. Administrative burden and uncertainty
Taxpayers are required to accurately value all of their assets annually. Consider foreign assets or investments that are difficult to value. This creates ambiguity, discussions and additional costs.
4. Legal vulnerability
There is much legal doubt as to whether taxation of unrealized gains is sustainable within property law. There is a risk that this system too could eventually go under in the courts, just like the previous box 3 model.
5. International deviation
Research by the Dutch Association of Tax Advisers shows that none of the 12 countries surveyed has a capital gains tax within income tax. Thus, the Netherlands chooses an exceptional path, against international custom.
Conclusion
We find it incomprehensible that the legislature, against expert advice and with the past in mind, is again opting for a fragile and complex system. The preference for predictable tax revenues seems to be more important than legal tenability or practicality.
Our message is clear: abandon the idea of capital gains, and opt for a simpler, legally robust system based on capital gains. That is fairer, more workable and more internationally grounded.
Questions about box 3 or your investment structure? &advice thinks along
The next few years will determine the design of Box 3. Do you want to know what this means for your assets, investments or tax structure? Or are you curious if restructuring makes sense now?
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Summary for blog summary
The government wants to start taxing actual returns in Box 3 starting in 2028, but that carries major tax and legal risks.
