The Dutch House of Representatives has approved a landmark tax reform that will require residents to pay a 36% tax on “paper profits”, gains from investments that have not yet been cashed in. The new law is set to take effect on January 1, 2028.
The “Actual Return in Box 3 Act” (Wet werkelijk rendement box 3) marks a major shift in how the Netherlands taxes wealth. This reform replaces the previous system of “assumed returns,” which the Dutch Supreme Court recently ruled unconstitutional.
How the New 36% Flat Tax Works
Under the new regime, the 36% tax applies to the actual annual increase in value of your assets. This includes:
- Cryptocurrencies
- Stocks and Bonds
- Bank Savings and Interest
Example: If your stock portfolio increases in value by €10,000 over one year, you will be taxed on that €10,000 gain, even if you do not sell any shares.
Exemptions: Real Estate and Startups
The Dutch government has acknowledged the “liquidity risk” (the challenge of paying tax without cashing out). As a result, different rules apply to certain assets:
- Real Estate and Startup Shares: These will follow a traditional capital gains approach. Tax on the value increase is only charged when the asset is actually sold.
- Small Savers: The law introduces a tax-free annual return threshold of €1,800. If your total investment returns are below this amount, no tax is owed.
- Net Losses: If you lose money in a given year, you can carry that loss forward indefinitely to offset future taxable gains (for losses over €500).
Impact on Global Talent and Investors
The Netherlands already has one of the highest personal income tax rates in Europe, with a top bracket of 49.50%. This new approach to taxing unrealized gains is unusual by European standards, as most countries (like Germany or Norway) only tax capital gains at the point of sale.
Critics warn that this “mark-to-market” system may lead to an exodus of crypto-investors and high-net-worth individuals who prefer jurisdictions with more traditional tax structures.
Next Steps
The bill has passed the House of Representatives but still requires Senate approval before officially becoming law. The government has also shortened the law’s review period to three years to allow for quick corrections if the implementation faces difficulties.
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