Dutch government claimed too much tax on citizens’ savings: Supreme Court

Many taxpayers may be able to soon claim money back from the tax authorities because the government levied too much tax on their savings, according to a ruling issued by the Dutch Supreme Court on Friday. The court said the government erred when it changed the method used for calculating the Box 3 assets tax starting in 2017.

Before that change, the Belastingdienst assumed taxpayers earned a 4 percent return on all savings and investment assets. Taxpayers had to pay a 30 percent income tax on that 4 percent imagined return. A new law took effect in 2017, where a percentage of assets had an assumed annual return of 1.63 percent, and the rest was taxed at 5.39 percent. This disproportionately affected those with over 975,000 euros in savings, whose entire portfolio carried the assumed higher return, even if the money was entirely kept in low-interest savings accounts.

“This does not take into account the actual choice of taxpayers or the actual return. The Supreme Court is compelled to offer adequate legal protection against the established violation of fundamental rights,” the court said. This taxation rule was considered to be a violation of the European Convention on Human Rights. The court ruled that those affected were due reparations.

In one particular case, a taxpayer and his wife kept their money in accounts which came nowhere near the government’s assumed return. He then effectively overpaid thousands of euros in taxes.

About 60,000 people joined with a taxpayers’ association to fight against the savings tax method. The association’s chair, Jurgen de Vries, told newswire ANP that they should be able to get money back, but the amounts were not immediately clear. He was delighted by the decision, and thinks others will also be able to claim a refund from the government. De Vries estimated that 1.3 million people have savings and assets which are solely in low-interest savings accounts, out of 3 million people who pay tax on Box 3 assets.

“This is a wonderful Christmas gift from the Supreme Court," tax expert Cor Overduin told Telegraaf. Overduin works with consultancy firm Grant Thornton and assisted the Bond voor Belastingbeers in the lawsuit. Overduin called the decision “unprecedented” to award money back to the taxpayers.

The new Cabinet intends to start calculating Box 3 tax based on actual returns instead of assumed returns starting in 2025, the newspaper said. The Supreme Court decision could make the Cabinet move faster on the issue.

The tax-free allowance will rise to 50,650 euros next year, and will jump to 80,000 euros in 2023.