Significant changes coming for Expats in the Netherlands
If you are an expat living in The Netherlands, you need to read this.
A Supreme Court ruling announced on 6 June 2024, has found against the Dutch tax office, the Belastingdienst, in relation to how they calculate the tax liability under Box 3 of your tax return. Box 3, is where they assess your wealth tax.
If you are fortunate enough to enjoy the 30% ruling, and currently have a Box 3 exemption, this will still be relevant for you, see the changes that will impact you at the end of this article.
We will start with an important caveat: at Black Swan Capital, we are NOT tax advisers and as such do not provide regulated tax advice. We always take the expected tax impacts into account when providing financial planning and investment advice to international professionals living in The Netherlands and across Europe, and that is why we are highlighting this important Supreme Court ruling. Therefore, this is not tax advice. For more information, you can visit the Dutch tax office site at www.belastingdienst.nl.
Background and context
The way the Dutch tax office estimates returns on assets from which to calculate wealth tax liability has been under review for several years, since the method was deemed to be in contravention of European Convention on Human Rights (ECHR) back in 2021. If you are subject to wealth tax you may be aware that the government declares a deemed or estimated rate of return for assets, and this is what you are taxed on irrespective of your actual returns.
After the 2021 court ruling, the government modified the system with temporary reduced rates of returns, however on 6 June 2024, the Supreme Court ruled this is still not compliant with the European regulations.
The rates applied by the tax office in 2023 were, for an individual with assets over €57,000, or a couple with assets greater than €114,000, at the fictional rates of return were 0.92% per annum for bank deposits and 6.17% per annum for investments and other assets. These returns were subject to tax at 32%.
The changes
Because of this ruling, your 2024 box 3 tax position will change. The Belastingdienst is still reviewing how it will adjust the wealth tax model. The ruling stated that estimated rates of return to be used for box 3 wealth tax calculations on investments will have to be capped at actual returns. This is a significant change.
When it comes time to lodge your 2024 tax return you can speak with us if you need information regarding your investments, and we urge you to speak with your tax adviser for tax advice.
We can also expect longer term changes as the Dutch legislators plan a more substantial overhaul to assets tax to be implemented from 2027. The expectation is that the current wealth tax model will be replaced with a capital gains tax format and an associated raft of changes, however we must wait for details to be announced.
But wait there’s more for those on the 30% ruling
There is another change that will impact international professionals on a 30% ruling. This incentive has been diluted over the past several years with more changes to come.
From 2025 there is a substantial change that will result in the recipient no longer being able to enjoy the box 3 wealth tax exemption. If you have held your 30% ruling from before December 2023, this will be deferred until 2027 under the current model, but this may also be changed when the newly formed government sits to debate the proposed changes.
Speak with us
It is important to keep up to date with these changes and understand how they may impact your financial goals and how you manage your assets. This is another reason why regular reviews with your financial adviser is important, so we can adapt to the changing environment.
If you have any questions about your financial situation or would like to better understand how these changes may impact you, speak with us at Black Swan Capital. You can contact us at info@blackswancapital.eu.
