Update box 3
A few months ago, we wrote a blog about the calculation of box 3 taxes (also known as wealth tax) being overhauled as a result of a ruling by the Supreme Court. The State Secretary for Finance recently announced his plans to the House of Representatives. The restoration will be done using the savings variant. So what does that mean?
Before, the capital in box 3 was calculated using a fictitious financial benefit, also known as the hypothetical yield. For the new calculation method the so-called savings variant is implemented. The main difference between the two is that the Dutch Tax and Customs Administration first used a fictitious distribution of savings and investments. For example, if you only had savings, the tax administration still assumed that you would partly invest those savings and thus (probably) got a greater benefit from them. For the new calculation method the actual situation and distribution of savings and investments are used.
So, the savings variant uses a yield per category instead of the total in private assets, and thus a separate calculation for savings (bank and savings accounts), debts, and other assets (including investments and, for example, a second home).
The hypothetical yield is used still, but the rates that are applied are much closer to the actual returns:
- For savings, this is the average interest yield per year.
- For debts, this is the average mortgage interest per year.
- For other assets, this is the average yield of the past 15 years.
Another big difference is that the total of debts is no longer deducted from the total taxable capital, but that debts contribute to a lower taxable return.
Consequences for tax returns 2017-2020
The ruling of the Supreme Court has consequences for tax returns from the years 2017 to 2020:
- If you’ve only received provisional assessments for the years 2017 up to 2020, the box 3 levy will be revised in the final assessment. This means that the final assessment differs from the provisional assessment.
- If you’ve already received a final assessment for the years 2017 up to 2020, it will not be revised unless you were among those who filed an objection which has now led the Supreme Court to render its decision.
- A procedure is still ongoing at the Supreme Court, which will determine whether non-objectioners will also have their final assessments reviewed. A decision on the matter is expected in fall. Until then, it’s useless to submit an objection or request for an official review.
- A review is only submitted if you benefit from it. If the revision is disadvantageous, you won’t have to pay extra.
- The revised assessments for 2017-2020 will be imposed from October 2022. If you were among those who made an objection, you’ll be notified before 4 August.
- For tax returns for 2021 that were submitted before 1 May, taxpayers have received their annual assessment before 1 July and in line with the old rules. From August, these assessments will be automatically reviewed. The final assessment will therefore see a box 3 levy in accordance with the new rules.
- For tax returns for 2021 with a box 3 levy which were submitted after 1 May, taxpayers will directly receive an assessment according to the new rules. This means it will probably take a little longer than normal before you receive the assessment.