Calculation method box 3 period 2023-2025 – Netherlands
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Calculation method box 3 period 2023-2025 – Netherlands
The Dutch government will use the savings variant as a calculation method to determine the Box-3 levy in the Box 3 Bridging Act for the period 2023-2025. This in response to the Box 3 Legal Restoration Act (the codification of the Box 3 Legal Restoration Decree of June 28, 2022) for the period 2017-2022.
Netherlands Bridging legislation 2023 through 2025
Box 3 in the bridging years 2023 through 2025 will be calculated based on the calculation method that also applies for the restoration of rights, with a few minor adjustments. The percentages used for returns by asset type (savings, investments, or debt) will be reset annually so that they are as close to reality as possible.
These are the preliminary rates of return for 2023:
- Bank savings and cash: 0.36%
- Investments/other assets: 6.17%
- Debts: 2.57%
The difference between the restoration of rights and the bridging legislation
In the 2021 and 2022 tax returns, the Tax Administration still uses the old, original calculation method. In addition, the Tax Administration makes a recalculation based on the actual asset mix. If that new calculation is more favorable, the tax return will be adjusted automatically. But it is still possible to choose the old calculation method. This choice does expire in tax year 2023.
Future box 3 system
It is not yet known what the new system will look like as of January 1, 2026. In 2023, the Government will work out the proposal and the House of Representatives will discuss the choices to be made.
The broad outlines of the new system are known, however. In the new system, taxes are levied annually on the actual income from assets, such as interest, dividends and leases. In addition, taxes are levied annually on the positive and negative value development of assets in box 3, such as gains or losses on shares, increases or decreases in the value of real estate. Concerning real estate, it remains to be determined how the value development will be calculated. This can be done, for example, via a flat rate based on the market value or WOZ-value, or by calculating the difference between the market value or WOZ-value on December 31 and January 1 of the concerning year. The new system is expected to be implemented as of January 1, 2026.
The operation of the savings variant as of 2023
The box 3 tax will be calculated as follows:
Split the box 3 wealth into three asset categories:
- bank deposits (including deposits and, from 2023, cash);
- other assets (including, among others, shares, bonds, options, investment property, a second home, claims, crypto currency and shares in a VvE reserve fund); and
- debts.
Calculation of the rate of return: the lump-sum return divided by the return base (i.e., before deduction of the tax-exempt capital).
Calculation of the return base: the sum of the lump sum returns of the three asset categories.
As a final calculation of the benefit from savings and investments: the tax base (i.e., the return base after deduction of the tax-free capital) x the calculated rate of return.
The box 3 levy for 2023: 32% of the tax base (tax-free wealth €57,000).
Examples
See below for some examples, where the fixed returns for 2023 on bank balances and debts are 0.01% and 2.5%, respectively. These amounts vary each year. As mentioned above, they have just been adjusted to 0.36% and 2.57%
Example 1
Box 3 2023-2025
A single taxpayer “A” has bank accounts with a balance of €200,000 on January 1, 2023. In the spring of 2022, “A” bought a vacation home in “Z” with a WOZ-value of € 600,000. For this A borrowed an amount of € 550,000, the remaining € 75,000 “A” took from the savings account.
The box 3 asset amounts to (1):
| – Bank balances | € 200.000 |
| – Other assets | € 600.000 |
| – Debts | € 550.000 -/- |
| € 250.000 | |
| – Minus: Tax-free allowance |
€ 57.000 -/- |
| € 193.000 |
Then, for “A” this leads to the following calculation of the basis for savings and investments (2):
| – Bank balances | € 200.000 x 0,01% = | € 20 |
| – Other assets | € 600.000 x 6,17% = | € 37.020 |
| – Debts | € 550.000 x 2,50% = | € 13.750 -/- |
| Basis for savings and investments | € 23.290 |
The rate of return for the calculation (3) then becomes € 23,290 / € 250,000 = 9.32%.
The box 3 income from savings and investments (4) become € 193,000 x 9.316% = € 17,980.
The final levy for “A” amounts to (5) € 17,980 x 32% = € 5,754.
In this example, the income from savings and investments of € 193,000 leads to a box 3 levy of € 5,754. This represents a wealth tax rate of over 3%.
Example 2
Box 3 2023-2025
Suppose that “A” establishes a savings BV and an amount of € 200,000 is deposited. What are the consequences for the box 3?
The box 3 asset then becomes (1):
| – Bank balances | € 0 |
| – Other assets | € 600.000 |
| – Debts | € 550.000 -/- |
| € 50.000 | |
| – Tax-free allowance | € 57.000 -/- |
| € 0 |
The calculation of the basis for savings and investments (2):
| – Bank balances | € 0 x 0,01% = | € 0 |
| – Other assets | € 600.000 x 6,17% = | € 36.600 |
| – Liabilities | € 550.000 x 2,50% = | € 13.750 -/- |
| Basis for savings and investments | € 22.850 |
Rate of return (3): € 22,850 / € 50,000 = 45.70%.
Income from savings and investments (4): € 0 x 45.70% = € 0
The levy due (5) then amounts € 0 x 32% = € 0.
As this example shows, it is still attractive to set up a limited liability company from which an annual savings of €5,754 will result (see Example 1).
Example 3
Box 3 2023-2025
The parents of “A” (tax partners) are investors in real estate. They own a total of €6,114,000 in rental properties, for which they have borrowed €5,900,000. What do the box 3 assets look like?
Box 3 assets (1):
| – Bank balances | € 0 |
| – Other assets | € 6.114.000 |
| – Debts | € 5.900.000 -/- |
| € 214.000 | |
| – Tax-free allowance | € 114.000 -/- |
| € 100.000 |
The calculation of the basis for savings and investments (2):
| – Bank balances | € 0 x 0,01% = | € 0 |
| – Other assets | € 6.114.000 x 6,17% = | € 372.954 |
| – Debts | € 5.900.000 x 2,50% = | € 147.500 -/- |
| Basis for savings and investments | € 225.454 |
Rate of return (3): € 225.454 / € 214.000 = 105,30%
Income from savings and investments (4): € 100.000 x 105,30% = € 105.300
In this example, levy due (5) is bedraagt de verschuldigde heffing (5) € 105.300 x 32% = € 33.696
Optimizing the composition of the box 3 capital
It is very important to have a clear picture of the box 3 assets and how the box 3 assets are distributed over the categories bank balances, other possessions, and debts. The new levy system can turn out unfavorable, especially with regards to other assets and debts.
Ideally, the box 3 income from savings and investments should be below the tax-free allowance. Then there is no box 3 levy at all, no matter how high the (fixed) income from assets.
Opportunities to reduce box 3 income from savings and investments and even to € 0:
- swapping low-yielding assets (such as government bonds) for savings;
- claiming receivables and converting them into a bank deposit;
- redeeming loans from investment assets;
- temporarily converting high-yielding assets into savings outside the arbitrage period;
- borrowing savings.
If you have any questions about box 3 taxation or would like to discuss your situation with us, please feel free to contact us.
