Dutch Taxes – Part 4: Box 3

Today a new instalment of the Dutch Tax Series, and one that is important for those who want to reach FIRE. Wealth tax! Dutch Taxes – Part 4: Box 3

Dutch Taxes – Part 4: Box 3

In the Netherlands you do not have to declare income on rental properties, capital gains on shares/home sales, income from dividend or interest earned on savings. Instead the government wants to know your wealth. Your wealth consist of your assets minus debts.

Your wealth can thus include (among others):

  • Cash
  • Stocks/Bonds
  • Rental property/second home (minus mortgage/loan)
  • Loans to a private person or a business
  • Any other debts that are not covered under Box 1 or Box 2
Dutch Taxes – Part 4: Box 3

Return on Investment

The government will assume you have earned a certain Return on Investment (ROI) and will tax that assumed ROI.

For 2015 the government assumes you made a 4% return and charges a 30% tax on that return. However, you have a certain amount exempt from taxation (“heffingskorting vermogen”), which is € 21.139 for a single person and € 42.278 for a couple. The effective tax rate is therefore a fixed 1.2% on your wealth above the exception amount.

As of January 1, 2017 the following taxation is considered for a single person (you double the range for a couple):

Wealth BracketRangeAssumed Average Rate of ReturnEffective Taxation
1Up to €25.000N/Anil
2From €25.000 to €100.0002.9%0.87%
3From €100.000 to €1,000,0004.7%1.41%
4From €1.000.001 and up5.5%1.65%

2019 Update

As of January 1, 2019 this will likely change and the following taxation is considered for a single person (you double the range for a couple):

Wealth BracketRangeAssumed Average Rate of ReturnEffective Taxation
1Up to €30.360N/Anil
2From €30.361 tot €102.0101.93%0.58%
3From €102.011 to €1.020.0964.46%1.34%
4From €1.020.097 and up5.6%1.68%

So the lower end of wealth is taxed less and the upper levels get a higher tax bill in 2019. Also the amount exempt has gone up over the years.

Green Investments

There is also a double tax break for “environmentally friendly” investments (“Heffingskorting voor groene beleggingen”). The government has selected a few investments options that promote environmentally responsible developments/investments. Compared to normal investments, your wealth amount that is excluded (“vrijstelling”) from taxation is larger to the amount of € 57.385 for a single person and € 114.770 for a couple (for 2017).  These value have been increased for 2018, and are anticipated to further go up in 2019.

Additionally, an increased tax break (“Extra Heffingskorting”) of 0.7% is also applicable of the amount that is excluded from taxation. In short, a pretty good tax reduction. However, we are unsure whether this make financial sense (e.g. if the benefit out way any lower (?) ROI for these funds, perhaps a future post!).

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  1. Could you please elaborate on the math? So if a single person has 100kEUR in the bank and let’s say that is the entire wealth what will the tax likely be? Thank you!

    1. Hey MS,
      See here for the 2019 details from the tax department (in Dutch): https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/vermogen_en_aanmerkelijk_belang/vermogen/belasting_betalen_over_uw_vermogen/grondslag_sparen_en_beleggen/berekening-2019/

      So if you have €100.000 as a single, you’d get the following:
      0-€30.360 = exempted from taxes = €0
      €30.360-€100.000 = €69.640 = effective tax rate 0.58% = €403.91 to be paid in wealth taxes (some deductions, like the heffingskorting, might still apply!)

  2. This seems devasting for someone relying solely on an investment portfolio. Particularly an expat like myself who may also be taxed on realized LTCG on the US-side. An annual wealth tax irrespective of market returns almost guarantees death by Sequence of Returns Risk. To maintain a SWR of say 3.5% with a portfolio of 1M+ Euro you would have to limit your withdrawals to 1.85%. Even with the social benefits of the Netherlands, that is downright depressing.

    1. You make a couple of good points, I’ve never looked at how the sequence of return risk is affected by wealth taxes. That would be an interesting assessment to do. Only downside is that the percentage of wealth tax is not stable either. Lot’s of unknowns here! The fact that you get also get taxed on capital gains makes it rather depressing indeed. Not sure how you would fixt that. That being said, real estate does provide some tax relieve in this country. Too bad the prices are sky high right now.

    1. Oops, that slipped through the crack (table was originally setup in the same way the belastingdienst made their table), thanks for pointing that out. All corrected now.

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