The state of play, seven simple questions

There has been considerable controversy surrounding the levies in box 3. In a nutshell: In 2021, the Supreme Court ruled  (Dutch article) that the way in which income generated from property was calculated violates the European Convention on Human Rights (ECHR). This was replaced by a new method, which was subsequently declared illegal in June 2024. But what about taxable income in box 3? And what is the state of affairs after the June ruling? Lupacompany clarifies the matter, by anwsering six simple questions.

1. What was decided in June?

In June, the Supreme Court (HR) issued several rulings on the way in which income from property (box 3) is currently calculated. According to the ruling, the Tax and Customs Administration must only tax the actual return on capital if this is lower than the fictitious return. The supreme court ruled in 2021 that the new calculation method violates the prohibition on discrimination and undermines property rights. The Ministry of Finance is now (July 2024) studying the ruling and will formulate how  box 3 income can be calculated correctly. This is a hugely complex operation, because returns on stocks, cryptocurrencies and real estate, for example, are far from static. Generalization by means of fictitious returns will no longer be allowed. According to the court, the transition to box 3 levies based on actual returns must be fully operational in 2027.

2. Who is taxed in box 3?

Back to basics, how do things look now in box 3? You have to pay tax in box three, when your assets (i.e. assets minus debts) exceed a certain threshold. After any debts have been deducted from your assets, if do not have a tax partner in 2024, you will have to pay tax on passive income in box 3 on any assets over the € 57,000 threshold. If you do have a tax partner in 2024, then you will have to tax on passive income in box 3 on any assets over the € 114,000 threshold.

3. What do I have to declare in box 3?

Assets that you have to declare on your tax return include, for example, your savings, shares, a second home or cryptocurrency. For a complete overview (in Dutch), click here. Most debts (in Dutch) can be deducted your assets. For example, a negative bank balance or inheritance tax fall into box 3. Please note: for a negative return on debts that you can deduct from the assets in box 3, a tax-free threshold (also) applies. Only the part of the debt that exceeds the threshold of €3,700 (without a tax partner) or €7,400 (with a tax partner) is deductible from the assets.

4.How is the yield from my assets determined?

For 2024, it has been determined that box 3 income in the (provisional) assessment will be calculated in accordance with the Box 3 Legal Restoration Act. This means that the assets must be indexed in a way that comes closest to the actual yield (return). In other words: Returns from bank deposits should be taxed less heavily than returns from investments and other assets. The negative interest rate on debt is also included in the final calculation. The sum of the return on the actual distribution of each person's individual assets (suspense account balances, assets/investments and debts), minus the tax-free threshold (see above) is the amount taxed in box 3.

5. How much tax do I have to pay in box 3 in 2024?

The rates of return in 2024 are as follows:

• Bank balances: 1.03% (provisional rate, final rate to be determined in early 2025)
• Investments and other assets: 6.04% (fixed percentage)
• Debts: 2.47% (provisional percentage, final will follow in 2025)

The Tax and Customs Administration calculates using the revenues on assets that exceed the tax-free threshold. The negative percentage on debts (again: above the threshold) is deducted from this. This is the taxable income from box 3. You will pay 36% tax on this in 2024.

For a step-by-step plan to calculate the amount of tax to be paid in box 3 yourself, please visit this page (in Dutch) of the Tax and Customs Administration. 

6.What about previous years?

For the years 2021 and 2022, box 3 income was calculated by the Tax and Customs Administration using the old and a new method. Whichever method was most favourable to the taxpayer was applied. In 2023, only the new method was used, which  takes into account different returns (in Dutch) for bank balances, investments and assets. In 2023, 32% tax must be paid on the sum of the return in box 3.

7. What's next?

It is not yet known what consequences the Supreme Court's ruling on June 6  will have for tax assessments carried out in previous years or in 2024. Have you received a provisional assessment? Then you must comply with it. Those who received a refund or are otherwise affected by the Supreme Court's ruling will receive a letter about this from the Tax and Customs Administration.

Lupacompany is closely following the developments with regard to the changes in box 3. We'll keep you posted!