Netherlands likely to start taxing capital gains annually by 2028
A majority of parliamentarians are prepared to vote in favor of modifying annual income tax filings to include a tax on capital gains, both realized and unrealized gains regardless of whether the investments have been liquidated. The controversial proposal is part of a plan to modify the Box 3 asset tax after court rulings said the government was wrong to base the tax on fictitious returns.
The Tweede Kamer, the lower house of the Dutch parliament, debated the plan to change the Box 3 tax system once again on Monday. Parliamentarians ranged between dubious and critical of the plans, as is evident by the over 130 questions posed to caretaker State Secretary Eugène Heijen for Taxation, according to the Telegraaf.
The consensus was that the plan is still flawed, but a majority of parliamentarians will support it, if only because delaying the implementation of a new system is costing the treasury some €2.3 billion per year.
The biggest issue is that investors in stocks, bonds, or cryptocurrencies will have to annually pay tax on their returns, even if they haven’t yet cashed out their investments. The majority of parties in the Tweede Kamer consider this undesirable. Heijnen said in the debate that the caretaker government also only wanted to tax these returns once they are paid out, but that is not feasible by 2028. And the government cannot afford to delay the implementation of the new system even further.
Many parties understand that reasoning and will, reluctantly, vote in favor of the bill. These include VVD, CDA, JA21, BBB, and PVV.
D66 and GroenLinks-PvdA will also vote in favor. These parties support taxing profits that have not been liquified in principle. “That won’t lead to billions in budget losses and is easier to implement,” said GroenLinks-PvdA MP Luc Stultiens. The left-wing party also expressed the wish to tax people with higher capital gains more heavily.
The new Box 3 system will be more beneficial for people with real estate investments. Unlike with the current system, they will be able to deduct their expenses from their taxable profit. And they only pay tax when they take their profit. Though there will be an extra tax on the personal use of a second home.
During the debate, ChristenUnie MP Peter Grinwis pointed out that the new asset tax system will be just as, if not more, complicated as the current one. “We say every year that it should be simpler, but we do the opposite. So much complexity, are we really going to inflict this on our country?
