No doubt you know: your privately owned rental property(s) must be accounted for in Box 3 in your annual income tax return. Due to a change in the law from 1 January 2023, you may well end up paying more tax than before.
So how does taxation in Box 3 - aka the capital gains tax - work again? I won't tire you with too much jargon or numerical work. The gist of the applicable tax law on this point is, based on the WOZ value, you are deemed to make a return of 6.17% (2023) on your rental property.
"Assumed"? Yes. We are talking about a so-called flat rate here. A legally binding assumption. Are you actually making less return? For example, because you have a lot of expenses? For now, that doesn't help you. You get a blue letter on the doormat that assumes a return of 6.17%. Unjustified? Perhaps it is.
In any case, the highest Dutch court has ruled that the current box 3 legislation has to go back to the drawing board. Because of conflict with European Law. Since this Supreme Court ruling, the Cabinet - initially not yet outgoing - and the Lower House have been racking their brains over this issue. Where do we actually stand now?
Over 2 years ago, the Supreme Court imposed a duty on the Tax Administration to repair your possible tax loss from the year 2017. For now, only those who have filed objections are eligible to do so.
For those who did not object in the aforementioned years, there is renewed hope. There is a chance that the Supreme Court will rule that this group of taxpayers should also be compensated.
Meanwhile, the outgoing Cabinet is feverishly tinkering with new box 3 legislation. In essence, only the actual returns will be taxed from now on. A line is drawn through the flat rates. The new system of taxing actual returns would take effect in 2027. It is now certain that 2027 will definitely not be reached.
It has also been established that there is broad political support for reducing the transfer tax on rented property. Everyone agrees that the current 10.4% is really too high. In short, fiscally, there is much to be done.
Can you do anything yourself at this stage except wait and see? Yet you can. File your personal income tax return 2023 by 1 May at the latest, or request a provisional assessment 2023 before the same date, if you have not yet done so. That will at least save you 7.5% tax interest.
Tom Domic
Tax adviser
Berghoef Accountants and Advisers
