28 Jan

On Jan. 25, 2024, the central government presented a news article containing a proposal to make improvements to box-3 of the tax system. One of the changes involves the removal of the lump sum for the 1st home. The term lump sum is used to indicate that in a given case not the actual situation but an assumed situation is the basis for the tax rule. The proposal will continue to be developed with the target effective date being Jan. 1, 2027

The outgoing Cabinet began an Internet consultation for the new box 3 system in September 2023, in which a total of 1,737 responses were received. In addition, discussions were held with various interest groups. Delaying the Internet consultation until a new cabinet would make it virtually impossible to implement the new system on Jan. 1, 2027. As a result of the feedback and discussions, technical improvements were made to the consulted proposal.

Improvements in box-3

Some improvements include the elimination of the differential treatment of the 1st home in box 3, so that this home is now subject to capital gains tax like other real estate in box 3. It was also decided to remove loss relief from previous years due to high costs and complexity. Real estate and shares in family or start-up companies are valued at their fair market value at the beginning of 2027.

In addition, the treatment of enjoyment rights has been modified to prevent improper use. The purchase of enjoyment rights is no longer fully deductible in the year of establishment, but is gradually deducted during the years in which the enjoyment right exists. Unlike the original proposal, exchange gains or losses on foreign currency bank balances will also be taxed, which does result in an increased administrative burden for taxpayers with foreign checking accounts.

These improvements were made in order to start the implementation test. It is up to the new House of Representatives and a new cabinet to make final decisions on the design of the new box 3 system. To meet the January 1, 2027 deadline, the bill must be submitted to the House of Representatives in the summer of 2024.

Do you wish to have more information about the box-3 tax system in the Netherlands? Schedule a free consultation with one of our experts below.