Impact of Supreme Court ruling taxation in box 3

The systems of taxation in box 3

As a general rule, the current fictious return on investment system in box III will continue to apply.
Only in the event that the actual return on investment is lower than the fictious return on investment will legal redress be granted. It is up to you, the taxpayer, to prove that the actual return on investment is lower.

For the period 2017 to 2022, there is the possibility to choose between three charging systems.

1. The legal system, as it applied in the years 2017 to 2022;
2. Make use of the Recovery Act. Three categories: bank balances, other assets and debts;
3. The actual return on investment according to Supreme Court ruling June 6, 2024.

For 2023 until now:

1. Fictious rate taxation based on three asset categories: bank balances, other assets and debts;
2. The actual return on investment according to Supreme Court ruling June 6, 2024.

The choice of a system applies to each taxpayer. In the case of a tax partnership, each partner can opt for its own system of taxation in box 3.

How is the actual return on investment determined?

1. The starting point for determining the actual return is the entire capital in box 3. The returns on the various assets (bank balances, investments, real estate, other assets and debts) are added together. This must be done for both the fictious return and the actual return.
   Subsequently, these returns (of the total box 3 capital) are compared. The outcome ultimately determines the system of taxation to be chosen.
2. Inflation is not taken into account. The nominal value of the box III capital forms the basis for taxation.
3. The tax-free allowance is not taken into account when determining the actual return.
4. There is no settlement of positive/negative returns over previous years. In other words, a negative return from 2023 cannot be offset against a positive return in 2024.

5. In addition to the fact that the actual return can consist of interest, rent and dividends, the unrealised changes in value are also included in the actual return. When opting for the lump sum return, the unrealised change in value is not taken into account.
6. The costs related to the assets in box 3 are not deductible. This mainly affects the rental of real estate, since the rent is included in the calculation of the return, but the costs for maintenance and insurance may not be deducted.

Is there complete clarity now?

Unfortunately not. A number of matters are still not fully clear, even after the Supreme Court’s ruling:

1. How to deal with the personal use of a second home that is not rented out to third parties. Does this ownership lead to income in box 3?
2. How should the annual unrealised change in value on real estate, be determined?

Remuneration

If the Supreme Court ruling is applied, no interest will be paid to the taxpayer. This applies to both the tax interest and the statutory interest. Only if the statutory interest is higher than the tax reduction, on the basis of the ruling, interest will be paid.

What’s next?

In the situation that a final income tax assessment has been imposed on you, where the fictious return is higher than the actual return on the entire assets, an objection must be filed immediately. This secures your rights until the last ambiguities have been resolved.

Of course, AAme can assist you in objecting to the final income tax assessment. In doing so, we charge our usual rates.
For questions and/or comments, we can be reached at:

e-mail: tax@aame.nl
Phone: +31152158815

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See also our earlier coverage: Box 3 Legal Restoration Act.