New Dutch Cabinet pulling back Box 3 asset tax plan over unrealized gain tax fears
The new Dutch government has decided to pull the new Box 3 tax system, which was set to be implemented in 2028. Minister Eelco Heinen of Finance wants to make amendments to address the concerns and criticism about paying taxes on unrealized gains, a spokesperson for the Minister confirmed to NOS after reports in other media.
“There is a lot of criticism of the Actual Return Act. We are not deaf to that,” the spokesperson said. “The bill needs to be amended. The Minister and State Secretary will discuss this with the Senate and parliament.”
The Tweede Kamer, the lower house of the Dutch parliament, recently adopted the bill to reform the Box 3 tax after much debate and criticism. Parliamentarians' main concern was that under the new system, investors in stocks, bonds, and cryptocurrencies would be taxed on unrealized gains - the profits of investments that have increased in value, but haven’t been cashed out yet. This will result in investors paying tax on money they don’t have yet.
In recent weeks, this part of the bill received considerable criticism from wealthy individuals, with even Elon Musk chiming in by responding approvingly to someone on X calling the plan “crazy.”
Prince Constantijn of Oranje, the special envoy for Techleap, a government organization that supports startups, pointed out that startups often pay their employees in shares. Under the new law, these employees may have to pay a high wealth tax if those shares were to increase in value. The bill included an exception for shares in startups, where shareholders would only pay tax on the increase in value upon sale. But startups and scale-ups found the criteria too strict.
ABN Amro also warned that taxing unrealized gains would penalize investors.
The Dutch government had to change the Box 3 tax after multiple courts ruled that the current system is unlawful. In the meantime, the Tax Authority is taxing assets in Box 3 on a fictitious return. If the actual return is higher, asset holders don’t have to pay more tax. But if the return is lower, they can claim a refund. This system is costing the treasury approximately €2.3 billion per year.
Part of the reason why the Tweede Kamer decided to greenlight the Box 3 bill was because of how costly delays are.
It is not yet clear what changes Heinen plans to make to the bill.
