Dutch Real Estate: Box 1, 2 or 3?

With the proposed new tax laws for 2022, there are a lot of changes for real estate investing in the Netherlands. The primary conclusion is that owning real estate as of 2022 will be a lot more expensive, tax wise anyways. This begs the question, what is the best place (from a tax perspective) to allocate your real estate portfolio. We did a post a while back (2017) about this, which favoured Box 3. However, if we now incorporate the proposed chances for 2022? Today’s post is all about Dutch Real Estate: Box 1, 2 or 3?

Disclaimer: we are not tax professionals and this is only our interpretation of the tax code. Consult a specialist if you want to make sure the tax approach is best your situation!

Real Estate Taxation Options Introduction

The Dutch tax system gives you various options to manage the taxation of your Real Estate. It all depends on what you want to achieve and how actively you want to participate in your Real Estate. In this post we will look at 3 taxation options:

  • Taxation of Real Estate income in Box 1:
  • Taxation on Real Estate when incorporated, with Box 2; and,
  • Taxation of return on your wealth in Real Estate in Box 3.

Let’s have a more detailed look at that the different options would entail. Note that the general deduction (Algemene Heffingskortingen) should be the same for 2 and 3 options. However, it is subject to your income for Box 1 and therefore varies!

Dutch Real Estate: Box 1, 2 or 3?

Box 1 Real Estate Income Option

First off, in principle the government almost always sees your real estate as wealth under Box 3. However, and this is where the tax law gets a bit fuzzy too! When your Real Estate ventures (buying, sell, renting out) start to resemble “an active business”, the income is taxed as if you “work”. In this case your real estate income would be considered under Box 1. For the Dutch among you, this is a good post with some clarifications from past court cases.

For this assessment we assume you actively manage your own properties (assumed as long-term rentals) and that taxation is based on 100% of your net profits (income minus expenses). It is also assumed that both the general tax deduction (“algemene heffingskorting”) and “labour” deduction (“Arbeidskorting”) apply and are pro-rated on the actual net income as applicable.

One note, if you just AirBnB out your own house, you only have to add 70% of your income to Box 1! Also, if you rent out a room in your house and don’t get more than €5.367 (after interest deduction) a year in rental income, you don’t have to declare the income in Box 1.

Box 2 Real Estate Dividend Option

Another option to deal with your Real Estate is to incorporate into a business. In this case you can manage the properties anyway you please. You can also use the depreciation of the buildings and pretty much all other costs to limit your profit (and thus taxes).

However, for sake of this exercise we only look at minimal expenses to have “sufficient” income to live during your FIRE years. During your buildup phase, you could have a different approach as to how you use Box 2!

On the company profit you will have to pay 15% tax (flat rate 2021 up to €200.000 profit – “Vennootschapsbelasting”). Whatever is left, you can pay to yourself as dividend, which is taxed at another 26.9% (flat rate 2021). In short, your net profits are effectively taxed at 37.87% (2021 only!).

Couple things to consider. There is a “ter beschikking stellen” clause in the dutch tax code. This means that if you loan money to your own business, you have to report income on this loan under income taxes (Box 1). If you already have paid employment, this taxation could be as high as 49.50% (2021 rate)! Also, the interest rate you have to ask your own company is commonly around the 6% mark (as it’s an commercial unsecured loan).

Probably the best way to add investment capital is to create a BV (corporation) and add (share) capital (e.g. “aandelen kapitaal” and/or “eigen vermogen”) to the reserves of the company. That way it’s able to be invested, but not taxed (it’s not profit in Box 2, nor wealth under Box 3).

Box 3 Real Estate Wealth Option

The proposed 2022 Box 3 taxation is based on your wealth and an assumed return on investment on this wealth. For real estate purposes this wealth is calculated as the government assess property value (WOZ) times a factor (“leegwaarde ratio”) that is based on the rental income. If you have a profitable property, this percentage is usually 85%. This wealth is assumed to have returned at 5.33% (2019 rate)

You may now reduce this income amount by your mortgages at a set percentage (3.03% for 2019). Next there is a general income tax credit (€400 for a single – €800 for a couple). Whatever income is left will be taxed at 33%. More details on the calculations and some examples can be seen here.

Assessment Assumptions

Let’s compare the 3 taxation options to see which one is best to FIRE purely on real estate alone in the Netherlands.

We have assumed the following for a single person:

  • Property market value (4 units) €500.000
  • Properties WOZ value (4 units) €450.000
  • Yearly rental income (8% gross) €40.000
  • Insurances: €1.600
  • Maintenance (2.5% market value): €12.500 (assumed primarily done by external parties; equal amount spend/reserved each year)
  • Property Taxes, sewage, garbage, etc.: €2.500
  • Marketing Costs (€20/month): €240
  • Property Management (tenant selection): €1.600
  • Property Management (total summation of monthly fees): €2.500
  • Yearly business expenses (year end statement, accountant, etc.): €1.000
  • Box 1 taxes as per 2021 (income tax 37.05% up to €68.507 income)
  • Box 2 taxes as per 2021(Profit tax of 15% and “dividend tax” of 26.9%)
  • Box 3 taxes as per 2022 (assumed return and debt rates as per 2019)
  • Income tax deduction Box 3: €400
  • General Tax Credit (as per 2021): €2.753 (prorated as per 2019 distribution for box 1)
  • You have not yet reached the formal retirement age (“AOW leeftijd”).

Utilities are assumed to be paid by the tenants. We have kept costs for insurances, property taxes and maintenance the same for all options. Since no tax rates are available for 2022, we have assumed the 2021 rates and the 2022 tax system for Box 3 for the calculations. Not perfect indeed, but it should give a reasonable comparison between the various taxation options as of 2022.

Comparison Box 1, 2 and 3 – No Mortgage Case Study

Next are the 3 taxation options for a single person with a net worth of €500.000 in paid off real estate.

Box 1 Tax Results

Based on the assumptions above, the Net Income is about €21.130. You could still improve this number by doing (some of) your own maintenance. But note that for every Euro you reduce expenses, you only get about €0.6 back in net income (due to taxation effects)

Dutch Real Estate: Box 1 taxation, single, you manage, €500.000 net worth

But what if you are lazy and only want to paint your windows every now and then? You don’t want to deal with tenants and the paper work? That’s fine, you can probably still have it taxed as Box 1 as long as you do some of the (e.g. maintenance) work yourself. In that case you get this:

Dutch Real Estate: Box 1 taxation, single, you lay in hammock, €500.000 net worth

This means that if you have about 4-5 apartments which are managed for you, you can have about €1.550 a month without much effort in Box 1. Not too bad!

Box 2 Tax Results

The total net income comes to just €16.441 in Box 2 if you do the work yourself. That’s a whole lot less than Box 1. This is due to the large tax credit you receive if you “work” in this country.

There is one big note as you perform (part-time) work at/for the company as you actively manage the properties. If you work (part-time) for the company you also need to pay yourself income (which comes in Box 1 for tax purposes).

However, for simplicity reasons, this has not been taken into consideration here. If you would, the profit, and thus the available dividend, becomes smaller. You would get some of this lost income back via Box 1 income and due to tax credit probably end up with more money!

Dutch Real Estate: Box 2 taxation, single, €500.000 company assets

Same as with the Box 1, what if you have all works subcontracted and you only run the company (with very little time involved)? You get this:

Dutch Real Estate: Box 2 taxation, single, €500.000 company assets, all work subcontracted

Box 3 Tax Results

As noted in earlier posts, the taxation in Box 3 will shoot up a lot. Where Box 3 real estate investments, was the winner with the lowest taxation in 2017, now it has got the highest!

The net income here is just €15.457. That’s the lowest net income of the three, even if you more fairly compare with the managed options in Box 1 or 2 (albeit the difference between box 2 and 3 is minimal). What a change from 2017!

Dutch Real Estate: Box 3 taxation, single, €500.000 wealth

Comparison Box 1, 2 and 3 – With Mortgage Case Study

What happens if you do have a mortgage, but the same net worth as the previous example? What if you have a larger portfolio, but with mortgage. Here is another comparison for ya!

Assessment Assumptions

Here are the updated assumptions for a single person with a bigger leveraged portfolio (but same net worth of €500.000):

  • Property market value (8 units): €1.000.000
  • Properties WOZ value (8 units): €900.000
  • Yearly rental income (8% gross): €80.000
  • Mortgages (at average interest rate of 2.5%): €500.000
  • Mortgage expenses: €12.500
  • Insurances: €3.200
  • Maintenance (2.5% market value): €25.000 (assumed primarily done by external parties; equal amount spend/reserved each year)
  • Property Taxes, sewage, garbage, etc.: €5.000
  • Marketing Costs (€40/month): €480
  • Property Management (tenant selection): €3.200
  • Property Management (total summation of monthly fees): €5.000
  • Yearly business expenses (year end statement, accountant, etc.): €1.000

Box 1 Tax Results

Here are the two options for doing most of the work yourself, and the hammock version with you rarely lifting a finger. But both taxed in Box 1 for income tax purposes.

Dutch Real Estate: Box 1 taxation, single, you manage, €500.000 net worth (with mortgage)
Dutch Real Estate: Box 1 taxation, single, you lay in hammock, €500.000 net worth (with mortgage)

As can see, leveraging also works for Box 1 income. Having the same net worth on paper, the leveraged option provides you with €27.292, rather than €21.130 in net income without leverage.

Even the hammock version of this approach works in your favour, with €22.830 net income vs €18.843.

However, there is a big note here, this is not net-cashflow! Since you have €500.000 in debts, and assuming you have an annuity mortgage, you have to pay this off. The monthly payment here is ~€2.243 (or ~€26.916 on a yearly basis). In this case your net cash-flow will be around €14.416 lower for both options! That means you probably won’t have sufficient income to live off. Bummer.

Box 2 Tax Results

Same as with box 1, you see the benefits of leveraging your real estate in Box 2. The added benefit is that your business expenses probably won’t change from the non-leveraged version. Here are the calculations:

Dutch Real Estate: Box 2 taxation, single, €1.000.000 company assets / €500.000 company debts
Dutch Real Estate: Box 2 taxation, single, €500.000 company assets / 500.000 debts, all work subcontracted

Again here, lots of extra income with the leveraging, but cash-flow wise a problem. Especially here as you technically cannot pay out the net income due to cash-flow restrictions (you might be able to get the money from the reserves of the company, if there are any).

Box 3 Tax Results

And here is the final one from Box 3 with leveraging:

Dutch Real Estate: Box 3 taxation, single, €500.000 net worth with mortgage

In the compared to the non-leveraged version with €500.000 net worth, you are up over €5.000 in income (from €15.457 to €20.529). That is actually more than the hammock version in Box 1 (which increased by only about €4.000). That being said, same cash-flow issues exist here too.

Comparison Box 1, 2 and 3 – €1M Portfolio – No mortgage

Last comparison for today. Let’s assume you have (already) paid of your mortgage as mentioned in the previous comparison. You thus have a portfolio of €1.000.000 without any debts. This means a higher income and less tax credits for the Box 1 option, the Box 2 option just has lower expenses and Box 3 no longer has debt deductions. The cash-flow now obviously should work in all scenario’s.

Let’s assume you are getting older (but are not yet formally retired!) and don’t want to “work” your real estate much yourself anymore. What is then you best option? Here are the three “hammock” options:

Dutch Real Estate: Box 1 taxation, single, you lay in hammock, €1.000.000 net worth (no mortgage)
Dutch Real Estate: Box 2 taxation, single, €1.000.000 company assets, all work subcontracted
Dutch Real Estate: Box 3 taxation, single, €1.000.000 net worth no mortgage

The net incomes are creeping closer together as you can see. The box 3 option is now slowly getting more interesting once again compared to Box 1 and 2. This is due to the reduction in tax credits for Box 1, which decrease with increasing income. However, Box 1 in this example is still more interesting, with the note that you really should not have any other income (pension, job, side hustle or anything) to make this work.


There are obviously lot’s of assumptions and simplifications in these calculations. It’s imperative that you calculate through your own situation to find out what works for you. Also age has an impact due to changes in tax brackets once you reach formal retirement age (AOW leeftijd). But that is also the time you will start to receive income again (hopefully) from AOW, pension and/or insurance products (lijfrentes). This will start to affect the height of you Box 1 income and thus whether putting your real estate income here is a smart idea. It still might, but you would have to calculate that for yourself.

FIRE Journey

It really depends on what phase you are in during your FIRE journey, as to what Box might be interesting. If you have a job and a decent income, you really don’t want you real estate income in Box 1. That would likely be brutal in taxation terms (and on daycare benefits for example!).

However, once you stop working, it might very well be a smart idea to shift your real estate income to Box 1, just to benefit from the various tax credit available. But there is a limit here. For example if you have a big portfolio (>€1M) with ditto income, there will be a crossover point where you are better off keeping it in Box 2 or 3. Even with the proposed new tax rules.

Single vs Couple

All the shown examples are done based on being a single. If you are a couple, you get more tax credits in all scenarios. However, Box 3 get’s hit even harder from 2017 to 2022. That being said, moving your real estate into Box 3 might be most interesting as you get both credits twice! So the current perks in Box 3 kind of get shifted to Box 1.

After seeing these calculations, we are now strongly considering both getting new jobs and work hard in the next two years. Killing most of our debts in the process to increase cash-flow. Then both stop working in 2022, move to a different house and switching all our real estate into Box 1. It really seems the smartest thing to do. The good thing here is that we can use the benefits of Box 3 for the coming years (where taxation is currently still really low), and switch when they disappear.

Dutch Real Estate: Box 1, 2 or 3?


There are a few other perks in Box 1 and 2, that you don’t get in Box 3. You can deduct expenses related to your real estate. In short, if you do your own tenant selection, screening and maintenance you need stuff. You need a phone, and a computer, and an internet connection. You also need tools. Heck you perhaps even need a car! See where I’m going with this? There are obviously rules as to what you are and are not allowed to deduct, but there is some room to play here.

Limited Liability

There is a big perk for Box 2, which you don’t have in either Box 1 or 3. Limited liability. When you incorporate you protect you personal wealth from lawsuits (assuming you did nothing wrong or against the law). Especially if you have a larger wealth, this could start to become important and worth the lower net income. Risk management is key.


As noted before, the Dutch tax system can be complicated and has many exceptions and exclusions. It also changes as you can see, especially the major difference in how Box 3 is being taxed. Changes can have a major impact on your FIRE journey and when you don’t have a job anymore. Or, whether you perhaps want to keep a job during FIRE. It strongly affects how you setup your wealth and how want to have it taxed. That being said, due to the changes, it seems that Box 1 might actually become pretty interesting as of 2022, even if you don’t want to do a lot of the work yourself!

Thoughts, ideas, errors? Bring it on!


  1. Dear Mr. CheesyFinance,

    Given the current Covid economic environment, I would love to have a couple of sites to read every day or every week when I can update myself objectively about the RE market in NL. Pretty websites that provide updates on statistics, data, associations, and trully show wha’ts going on in the market and what the predictions are etc, rather than news. I have been speacking with a couple of RE brokers but I am not sure I can rely on this conversations and would rather go directly to the source. Thanks lots for any tips. And I do write in English but Dutch sites are ok for me as well. Thanks lots and wish you and Mrs. CheesyFinance a great time.

    1. Hi Nella,

      If you find those sites wit data (other than the one from the CBS), let me know! The real estate investment world is somewhat closed and there is not a lot of data that is being shared. Best chance for you is to network your way into the RE world to find deals and the best places to pick up properties. Online you likely won’t find much unfortunately.

      Best of luck

  2. What happens if you own 50% of the shares of a BV that owns your family home?

    Is the following correct?

    1) You wouldn’t have to pay Box 1 for it, since nobody is paying you money for the house.

    2) You wouldn’t have to pay Box 2 for it, since even though you own >5% of the BV’s shares, the BV isn’t making any profit from it.

    3) You wouldn’t have to pay Box 3 for it, since you don’t own the house directly (and therefore it’s not part of your personal wealth).


    1. Hello Andrés,
      Big disclaimer here, I’m not a tax specialist! That being said, if you do have a company and you own the shares, you wouldn’t pay either Box 1 or 3 taxes. However, a business is supposed to make money and pay tax. So having a company with just your house would not work. There would only be expenses and no income, hence no profit. The tax department might call that a hobby 😉 You might want to visit a specialist if you are considering adding your house to a BV, there must be limitation and exceptions associated with such a construction. That being said, I doubt it really provides a large tax benefit, but if someone knows more, please let me know!

      1. In that case you will need to rent your home from the BV. The rental income will be taxed in the BV. When you take out dividends there is also the regular tax again

  3. Question about your example: 500K Euro for 4 houses/apartements that will bring 40K rent per year. That means buying an apartment for 125K and renting it out for 825 Euro. I like that! In which city/area in the Netherlands is this possible? Definitively not in the area where I live (Gooi)

    1. It’s very hard to come by in today’s market, but it reflects how our portfolio is doing (we bought back in 2014 and 2016). That being said, it’s still possible in places like southern Limburg and Zeeland. But that brings some other risks with it 😉

  4. First of all thank you for doing these calculations, it gives a nice overview 🙂

    One question: is it allowed to swap boxes? It could be interesting to put your real estate in box 3 (passive) while working, box 1 (active) when not working before AOW. And then back to box 3 after AOW because you’re getting AOW and pensions comming in in box1.

    But towards dutch tax service you’re changing your mind a couple of times if its active or passive real estate. Will they buy that? 🙂

    1. Good question! I’m not 100% sure about the answer, but you are certainly permitted to switch between boxes if it conforms to the tax regulations. With this I mean that if there are life events or changes in how you manage your real estate, you can argue (and support with documentation) that you need it taxed differently. As long as you can do this, there should not be a problem I guess. But if you do switch “regularly”, you certainly will increase the chances of getting an audit at some point. You better have all the supporting documents to backup the information you filled out on your tax assessment 🙂

  5. Interesting.
    Am I right to think you would have to mortgage as a registered company if you were keeping real estate in Box 2.

    If so, would this affect the interest rates (or anything else related to availability of financing) offered by lenders?

    Asking from a position of pure ignorance.

    1. On the first one, yes. The mortgage will have to be requested by the company (or legal representative). But most rental mortgages are given based on the property (not the person). The property defines the risk for the mortgage provider. So whether you are a private person or company, it should not change much concerning the rates.

  6. With Box2 it is also possible to provide a (small) salary which could benefit you also.
    Also with a Box2 you can make it so that the wealth is more easily transferred to your children…

    When looking at these things it get’s really fast complicated.

  7. Thanks for the post.
    Two things:
    – I think you should also calculate for (real estate) taxation when you want to sell the real estate through the corporation route when deciding which route te take. Increases in prices leads up to a higher profit, thus more tax.
    – BOX 3 taxation can be further reduced by increasing debts (>70& LTV) while buying real estate which still has relatively low woz-value in comparison to the market price.

    1. Since this was a FIRE calculation, the whole idea is to never sell the property! That being said, if you have to (or want to), the profits will be taxed indeed. Something worth considering for sure for your exit strategy.
      As to your second note, it’s hard to leverage over 70% albeit not impossible. High leverage also has an big effect on your cash-flow and has an inherent risk during down markets. Be very careful what you do here! Even though on paper it would reduce your tax burden a bit.

  8. Hi Cheesy,

    Your assumption is slightly different than mine. I assume I still work in 2022. Hence no tax breaks on the real estate and a 49,5% income tax. Based on those assumptions, box 2 is more interesting by a 20% margin or so.

    However, with all things equal, the next couple of years my debts are higher than the leegstandwaarde value of the assets. Whereby in my case the leegstandswaarde is half of the marketvalue, die to low WOZ values in Rotterdam. Due to that I pay peanuts compared to box 1 and 2.

    Ergo, box 3 it is. This is a back of an envelope calculation. Will do it more thoroughly soon.

  9. great post, and always good to read into my bubble as you conclude that lowering debts is best ;-).
    on a more serious note: you don’t include the fact that you have to live somewhere yourself. so your rental income is 25% lower (of 12,5% in the second scenario) than assumed. or the tax benefits go to you’re (own) ‘first’ home and screw up the benefits ….

    1. For the post I’m kind of assuming that you rent yourself too. Including a house and the associated “woningwaardeforfait” would increase Box 1 income and thus it’s taxes. Might still be a very good option though!

  10. Cool Cheesy, thanks a million. I need to read it more thoroughly during an evening (without 3 kids running around me. And I’ll apply my numbers to your logic. I might need a car in box 2 to visit my property….:-)

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