Owners of vacation homes face skyrocketing taxes amid rising property values
The tax burden on vacation homes in the Netherlands has surged in recent years, with owners now paying three to four times more than five years ago, according to De Telegraaf. This has forced some owners to consider selling their properties due to the overwhelming financial pressure. For instance, owners of modest chalets are now facing taxes nearing 2,000 euros, while those with larger properties, such as three-bedroom vacation homes on the island of Texel, are seeing bills of over 8,000 euros.
The increases are primarily due to changes in the way vacation homes are taxed, which includes a rise in the fictitious return assumed by the government. Previously, homeowners were taxed at a rate of 30 percent on this fictional income; now, this rate has risen to 36 percent. The tax is applied to the WOZ (Waardering Onroerende Zaken) value of the property, which determines the basis for property taxes.
In some cases, the tax burden has become untenable. The owner of a three-bedroom property valued at 385,000 euros on the popular De Krim park in Texel faces a tax bill of 8,150 euros this year, compared to just 2,904 euros five years ago. Additionally, owners must contend with annual park fees, which now exceed 4,600 euros. Cor Overduin, a tax advisor at Grant Thornton, noted that vacation homes are heavily taxed. "A combination of rising WOZ values and increasing tax rates is leading to significant financial strain," he said.
Next year, the government plans to raise the fictitious return on real estate from 5.88 percent to 7.77 percent. This would mean a vacation home valued at 600,000 euros would result in an annual tax bill of nearly 17,000 euros. For the Texel property mentioned above, this would lead to an increase in tax to 10,796 euros, while a modest chalet at Europarcs Beekbergen would see taxes rise to more than 2,500 euros—a fivefold increase from 2020.
Property values have risen sharply in popular vacation destinations. On Terschelling, for example, vacation homes have tripled in value over the past decade. One family has seen the value of their property rise from 350,000 to 1.1 million euros, while the annual tax burden has climbed to 20,000 euros. The owner of this property, who preferred to remain anonymous, stated that the high taxes make renting the property financially unfeasible. "We are being forced to sell," they said. "But we don’t want to. This house has been in the family for generations."
Some buyers, according to real estate agent Jasper Luyten of Luyten Makelaardij, who spoke to De Telegraaf, are wealthier individuals who buy properties and immediately remove them from the rental market. This has led to a shift in the market, with fewer investors looking to purchase vacation homes purely for rental purposes. Instead, buyers are seeking properties for personal use, often hoping to cover costs through occasional rental. However, the current tax structure makes this increasingly difficult, with some properties now seeing a return of only 1 to 3 percent.
Luyten also pointed out that the increased cost of maintaining properties on vacation parks, which can now reach up to 3,000 euros annually from 1,500 euros in previous years, is another contributing factor to the higher costs of ownership. Additionally, the rise in the Dutch transfer tax from 2 to 10.4 percent has made the purchase of vacation homes more expensive.
These increasing costs are being passed on to vacationers as well. The price of renting a vacation home in popular parks has climbed to 2,200 to 2,600 euros per week for a four-person chalet during the summer. Next year, this will likely increase further due to planned hikes in the VAT on lodging from 9 to 21 percent. Jeffrey Belt of the Hiswa-Recron industry association warned that if these plans are implemented, it could lead to fewer investments in the vacation home sector and make vacations in the Netherlands unaffordable for many consumers.
Belt also noted that higher taxes and interest rates are impacting individual investors' ability to purchase vacation homes. "This is leading to a decrease in demand and making it harder to sell properties," he told De Telegraaf. Despite this, there is still interest from individuals purchasing properties for personal use.
The tax exemptions for vacation homes are limited. Property owners can receive a tax exemption on the first 57,000 euros of the property’s value, but beyond that, there are no significant breaks. Even for those who do not rent out their properties, the government continues to apply the fictional return tax. If owners challenge this and attempt to be taxed on actual rental income, they are often faced with an increase in the property’s deemed value, further escalating the tax burden.
Tax advisor Cor Overduin emphasized that the situation has become "distorted" for vacation home owners in the Netherlands. "It’s better to have a vacation home abroad. If you own a property in places like Knokke in Belgium, you can avoid double taxation and receive deductions. In comparison, owning a vacation home in Domburg or elsewhere in the Netherlands is much more costly."
