Change to box 3 levy on income from savings and investments
Change to box 3 levy as of 2022
On December 24, 2021, the Dutch Supreme Court issued a ruling that may have consequences for you as a taxpayer. In this ruling, the Supreme Court decided that the box 3 levy on income from savings and investments is in conflict with the European Convention on Human Rights. This article discusses the judgment and the consequences it may have for you.
How does the box 3 levy work?
Since 2017, box 3 has a flat-rate system. With this system, the legislator aims to match the returns achieved on average by taxpayers in previous years. With the flat rate, an average is taken that applies to all taxpayers. It is assumed that part of the assets consists of investments and part of the assets consists of savings. The part that is assumed to consist of investments is assumed to yield a higher return than the part that consists of savings. Because the balance between savings and investments can differ in reality from the average taken, the calculated in reality can differ from the actual return achieved.
Lump-sum system in violation of European property law and the prohibition on discrimination
In this judgment the Supreme Court ruled that the fixed sum system of box 3 is in conflict with the European law on property and the prohibition on discrimination. According to the Supreme Court, there is no reasonable relationship between the interests that the legislator wanted to serve with the system and the inequality caused by the system.
Difference between actual return and taxed return lump sum system
This case involved the interested party and his wife with assets of approximately EUR 1 million. Eighty percent of these assets consisted of savings. The flat-rate system ensures that interested parties are taxed on a higher return than was actually achieved. The Supreme Court ruled here that this is not allowed. For this reason, the actual return is included in the tax for interested parties.
What does the change in the box 3 levy mean for you as a taxpayer?
If your actual return is lower than the fixed return, the judgment may have consequences for you as a taxpayer. You can object to the income tax assessment. You can do so once you have received the final assessment. Please note: you have 6 weeks from the date of the final assessment to file an objection. Your objection may be designated as a mass objection. If this is the case for 2017 and 2018, you can invoke the Supreme Court ruling. The tax in box 3 can then be recalculated based on the actual return. This can ensure that you pay less tax.
Until when is an action against the income tax assessment possible?
If the period for objection has expired, you could request an ex officio reduction of the assessment. However, the Minister has imposed conditions on the possibility of granting an automatic reduction. For example, an automatic reduction is no longer possible if 5 years have passed since the end of the calendar year to which the relevant assessment relates.
Objection box 3 levy for 2020 and 2021
For the 2020 and 2021 tax returns, it is also important to register for the mass objection (if the actual return is lower than the fixed return). The tax authorities have yet to decide what they will do with the ruling. In principle, the ruling only affects taxpayers who participate in the mass objection, which is why it is necessary to register for the mass objection.
Looking for a tax lawyer in Rotterdam?
Would you like to know more about the steps you can take against the assessment in box 3 and what the Supreme Court ruling will mean for the fixed box 3 levy? Please contact our tax lawyer David Harreman.
