Tax expert Jelle Kanters on box 3: ‘Actually, the entire system needs to be overhauled’

How complicated can it be to tax income from savings and investments? Politicians have been struggling with it for years: cabinets keep passing on the hot potato. Will the Jetten cabinet finally make a decision about box 3?

Since this century, anyone in the Netherlands who has a profit from capital has been paying tax on it in the now infamous box 3. Until the Supreme Court made mincemeat of the ‘fictitious return’ on which wealthy people paid annual tax in 2021. Because that assumed return was too high and unrealistic in some years, according to many people with savings.

Not fair

Box 3 was a novelty in 2001, conceived by the second Purple Cabinet. In doing so, the government wanted to put an end to all tax schemes to channel away returns. “It was super simple,” says Jelle Kanters, lecturer-researcher in tax law at Tilburg University. ‘And every sucker achieves more than four percent return, as Finance Minister Zalm put it at the time.’

‘The scheme was very robust and simple,’ says Kanters. It was also convenient for the wealthy, because all the returns above four percent (now six percent for investments, ed.) were untaxed. Whether you got five or fifteen percent, you didn’t pay a penny more in tax.

Credit crisis

But the credit crisis threw a spanner in the works for many savers. Due to the low interest rates, they no longer achieved the fictitious return, and yet they had to pay annual tax on it. Not fair, the Supreme Court ruled in 2021.

Kanters: ‘The government quickly came up with a temporary way of taxation: anyone who can prove that the return is less than the fictitious return only has to pay tax on the actual return. But those who achieve a higher return naturally opt for that four percent. As a result, a lot of tax revenue is lost every year until there is a permanent solution; a new system.’

Treasury is running out

Now the big question is: do you tax capital gains or capital gains in the new system? If you pay tax on the actual growth of your assets, or capital gains, people say that they have surplus value on their holiday home, for example, but that they cannot cash it in as long as the house has not been sold.

But if you only pay when you cash in on your assets, and therefore have capital gains, the tax authorities have to wait until you have sold that second home, and that can take years. In the meantime, the treasury is getting emptier, and the cabinet has to borrow more money to refurbish bridges and viaducts and keep the welfare state afloat.

Abroad

Actually, the choice had already been made. In February 2026, the House of Representatives reluctantly agreed to a capital gains tax from 2028, because otherwise there would be a hole in the budget. ‘That bill led to surprised reactions abroad,’ says Kanters.

‘As far as I know, no country has a capital gains tax. Abroad, a distinction is made between capital income and capital gains. The income such as interest, rent or dividend is taxed on receipt and the capital gain (increase in value) is taxed on sale.’

Capital gains

After the necessary criticism, also in our own country, the government wants to tax shares, bonds and real estate from 2028 via a capital gains tax. Other assets such as crypto should follow in 2030.

But these plans are also meeting with a lot of resistance in the House and beyond. Because the plans are going to cost money. Kanters: ‘We are talking about billions of euros in tax that come in later than with the taxation of capital gains.’

To close the gap, the government wants to tighten other tax rules, which will cost small savers and investors money in particular. For example, the government wants to reduce the tax-free allowance from 59,357 to 30,846 euros by 2027. As a result, more people will pay tax in box 3.

Adhesive tapes

It is good that the cabinet is going to make decisions, Kanters thinks. He thinks it is obvious that the coalition chooses to tax capital gains. But the whole system should actually be overhauled, he thinks: ‘Box 2 also levies tax on capital gains; What is the difference in principle between box 2 and 3 in the future? None of this seems to have been well thought out in the proposal.’

Kanters: ‘I think that income tax on assets needs to be completely overhauled. This proposal does not do that, so it creates new problems in other places. But a complete overhaul takes a lot of time and there is a rush, and that haste has lasted for almost five years. Apparently they would rather stick adhesive tapes that last a few years than take the bull by the horns.’

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