Technical Improvements in the Proposal for the New Box 3 System

The caretaker cabinet started the internet consultation for the new Box 3 system in September 2023. A total of 1,737 responses were received. Additionally, discussions were held with various interest organizations. Waiting for the internet consultation until a new cabinet would make it virtually impossible to implement a new system by January 1, 2027. In response to the feedback and discussions, technical improvements have been made to the consulted proposal.

The different treatment of the first home in Box 3 (effectively the second home, the first own home that is permanently used falls into Box 1), which is intended for personal use, has been removed. Instead, this home in Box 3 is also subject to capital gains tax just like all other real estate in Box 3. This has been done to simplify the system. The removal of the fixed amount also makes the system more explainable.

Additionally, it has been decided to eliminate loss offsetting with years in the past. This made it possible to offset losses with the previous year. The costs for this are high, while it is also very complex to implement. To make this possible, the Tax Authority will have to adjust assessments from previous years. Unlimited loss offsetting in future years remains possible.

For real estate and shares in a family or startup business, it still had to be determined how the value of these assets is established if they are already owned by taxpayers at the time the new system is introduced. It has been decided to use the market value at the beginning of 2027. For homes in Box 3, this concerns the WOZ value at the beginning of 2027.

It was also noted that in the treatment of enjoyment rights, such as future interest or dividends, there is a risk of misuse. To prevent this, the treatment of enjoyment rights has been adjusted. The price for purchasing the enjoyment right is no longer fully deductible in the year of establishing the enjoyment right, but is practically deducted in portions in the years in which the enjoyment right exists.

It has also been decided to tax the capital gains or losses from bank balances in foreign currencies, such as a bank account in US dollars, contrary to the consulted proposal. This will result in a clearer determination of the outcome of these bank balances. However, this will create a greater administrative burden for taxpayers with foreign payment accounts in foreign currencies. However, this is expected to be a relatively small group.

These improvements have been made to start the implementation assessment. It is up to the new House of Representatives and a new cabinet to decide on the final design of a new Box 3 system. To meet the January 1, 2027 deadline, the legislative proposal must be submitted to the House of Representatives in the summer of 2024.