Box 3 Reform 2028: What International Investors Need to Know

Understanding Box 3: The Dutch Personal Investment Tax

The Netherlands taxes personal income under a unique three-box system:

• Box 1: Income from employment, business profits, and owner-occupied housing (progressive rates up to 49.5%)
• Box 2: Income from a substantial interest (≥5% shareholding in a company) — taxed at 24.5% up to €67,000 and 33% above
• Box 3: Income from savings and investments — the focus of the upcoming reform

Box 3 covers all personal assets that do not fall within Box 1 or Box 2, including:

• Bank savings and deposits
• Listed securities (shares, bonds, ETFs)
• Unlisted investments
• Real estate (other than the owner-occupied home)
• Cryptocurrency
• Other assets (art, precious metals, receivables)

The Current System (Pre-2028)

Deemed Return

Under the current Box 3 system (introduced in 2017 and further modified following the Hoge Raad (Supreme Court) ruling of 24 December 2021 in the Kerstarrest case), tax is levied not on actual investment returns but on a deemed (fictional) return calculated as a weighted average of:

• A savings component (pegged to the average return on bank deposits — approximately 1.03% for 2025)
• An investment component (pegged to the average return on a diversified investment portfolio — approximately 6.04% for 2025)

The deemed return is calculated based on the composition of the taxpayer's Box 3 assets (ratio of savings to investments) and is then taxed at a flat rate of 36% (2026 rate).

The Problem

The Kerstarrest ruling found that the deemed return system violated Article 1 of the First Protocol to the European Convention on Human Rights (ECHR) — the right to peaceful enjoyment of property — because the deemed return could significantly exceed the actual return, resulting in a disproportionate tax burden.

Following this ruling, the Dutch government implemented a temporary "bridging" system for 2023-2027, which adjusts the deemed return categories but still does not tax actual returns. The definitive reform is scheduled for 1 January 2028.

The New System (From 2028)

Actual Return Basis

From 2028, Box 3 will tax actual returns (werkelijk rendement) on savings and investments. The key features of the proposed regime:

Regular Income

All regular income from Box 3 assets will be taxed on an actual basis:

• Interest income from bank deposits and bonds
• Dividend income from shares
• Rental income from real estate (gross rental less a 20% cost deduction for residential property)
• Other income (e.g., income from crypto staking, peer-to-peer lending)

Capital Gains

The most significant change is the taxation of capital gains — both realised and unrealised:

• Realised capital gains: Gains on the disposal of assets are fully taxable
• Unrealised capital gains: At the end of each tax year, the taxpayer must calculate the change in market value of their Box 3 assets. Positive changes are taxable; negative changes are deductible (but only within Box 3)

This "mark-to-market" approach means that investors will pay tax on paper gains even if no disposal has occurred. This is a fundamental departure from the principle that capital gains should only be taxed on realisation.

Losses

Unrealised and realised losses within Box 3 can be offset against Box 3 income in the same year. Net Box 3 losses can be carried forward indefinitely and offset against future Box 3 income.

Tax-Free Threshold

A tax-free threshold (heffingsvrij vermogen) will continue to apply. The current threshold is approximately €57,000 per person (€114,000 for fiscal partners). This is expected to remain broadly similar under the new system.

Tax Rate

The Box 3 tax rate is expected to remain at 36% under the new regime.

Impact on Different Asset Classes

Bank Savings

For taxpayers with predominantly bank savings earning low interest rates, the new system will likely result in a lower tax burden than the current deemed return system. Under the current system, even cash deposits are attributed a deemed return that may exceed actual interest earned.

Listed Securities

For investors in equities and bonds, the impact depends on market performance:

• In strong bull markets, the unrealised gains taxation will result in a higher effective tax rate than the current system (because the deemed investment return of ~6% may be lower than actual market returns)
• In bear markets or flat markets, the new system will produce a lower tax bill (because actual returns below the deemed rate are now taxed on their actual amount, including the ability to offset losses)

Real Estate

For holders of Dutch and international real estate, the shift to actual-return taxation represents a significant change:

• Rental income: Will be taxed on actual gross rental less a standardised cost deduction — potentially more favourable than the deemed return for properties with high loan-to-value ratios
• Capital gains: Unrealised increases in property value will be taxable annually — a material concern for investors with significant property appreciation

Cryptocurrency

Digital asset holders will be required to report the market value of their holdings at year-end and pay tax on unrealised gains. Given the volatility of crypto markets, this could result in significant tax liabilities in years of rapid price appreciation, even without any disposal.

Planning Considerations for International Investors

Non-Resident Investors

Non-residents with Dutch tax exposure on Box 3 assets (primarily Dutch real estate) should be aware that:

• Under the new system, they will be taxed on actual rental income and unrealised capital appreciation of Dutch property — rather than a fictional deemed return
• Tax treaty provisions (typically Article 6: income from immovable property, and Article 13: capital gains from immovable property) will determine whether the Netherlands retains taxing rights

Restructuring Opportunities

Before 2028, investors may wish to consider:

• Transferring investment assets into a Dutch BV (Box 2) — where only realised gains are taxed and the effective rate may be lower than 36% when accounting for the corporate tax rate and Box 2 distribution rate
• Relocating tax residence away from the Netherlands if the Box 3 liability on unrealised gains is projected to be disproportionate to actual cash returns
• Realising gains in 2027 under the current deemed-return system if the actual gain exceeds the deemed return (paying a lower effective rate under the current system)
• Establishing a trust or foundation structure that shifts the situs of assets outside Box 3 (subject to anti-avoidance provisions)

Compliance Burden

The new system will require taxpayers to:

• Obtain year-end valuations for all Box 3 assets (including unlisted investments, real estate, and cryptocurrency)
• Maintain detailed records of acquisition costs (for capital gains calculations)
• Report significantly more information in the annual tax return than under the current deemed-return system

Key Takeaways

• From 2028, Box 3 will tax actual returns — including unrealised capital gains — at an expected rate of 36%
• The shift from deemed to actual returns is favourable for cash-heavy portfolios but potentially punitive for appreciating assets (equities, property, crypto)
• Unrealised losses are deductible within Box 3, with indefinite carry-forward
• International investors with Dutch real estate are directly affected and should review treaty protections
• The period before 2028 presents a planning window for restructuring assets, realising gains, or migrating to Box 2 structures
• The compliance burden will increase significantly — year-end valuations and detailed cost-base records will be required for all Box 3 assets