Few policy changes in recent Dutch history have generated as much uncertainty among households and investors as the ongoing overhaul of Box 3 wealth taxation. In this episode of the Bondfish Human Finance Podcast, host Stanislav Polezhaev, CFA, founder and CEO of Bondfish, is joined by Ernst van Gassen, a multilingual tax expert specialising in transfer pricing for SMEs and international tax matters, and the author of a practical tax guide aimed at expats navigating the Dutch system. The conversation unpacks why the Dutch Supreme Court declared the existing wealth tax system unlawful, what the government's planned 2028 capital accrual tax will mean in practice, and how investors across different asset classes, from bonds and savings accounts to real estate and growth stocks, should be thinking about their portfolios in light of these sweeping changes.

Background

How Box 3 Works and Why the Courts Intervened

Van Gassen opened the discussion by tracing the architecture of the Dutch income tax system, which divides taxable income into three so-called boxes. Box 1 covers employment income, self-employment, and owner-occupied property. Box 2 applies to business owners. Box 3 captures all wealth and savings held outside a primary residence, including bank deposits, bonds, equities, investment properties, and other assets, minus any liabilities not tied to a mortgage on a main home.

The system as it stood from 2001 taxed Box 3 wealth not on actual returns but on a notional or "deemed" return, initially fixed at 4%. The underlying logic was one of administrative simplicity: rather than track the realised gains of millions of individual investors, the state assumed a standard return and taxed that. The minister at the time reportedly said that if any saver could not achieve 4%, they were welcome to knock on his door and he would hand them a government bond yielding above that figure. For many years, this compact held.

The problem began to unravel after the global financial crisis, when quantitative easing by major central banks drove savings rates to historically low levels. The Netherlands, a nation with an unusually high savings culture, found large numbers of households being taxed on notional 4% returns while their actual savings accounts were earning close to zero, or in some cases paying a negative rate to hold funds on deposit. Van Gassen described the Supreme Court's eventual verdict bluntly: the system had, in practice, become more akin to a confiscation of property than a tax on returns.

“

At a certain point, the court said, well, if you're not going to listen, we're just throwing the system out of the window.

Ernst van Gassen, Tax Expert & Author

The 2021 ruling drew on the European Convention on Human Rights, specifically the right to peaceful enjoyment of property. Because treaty obligations sit above domestic law in the Dutch legal hierarchy, the Supreme Court had the authority to effectively invalidate a portion of the income tax act. The legislature had received signals as early as 2015 to 2017 that the system was in tension with this right, but chose not to act. The court ultimately acted in its place.

The transitional system now in force is, as van Gassen noted, a hybrid that arguably favours the taxpayer. Where an investor's portfolio has generated returns above the deemed rate, taxation is capped at that notional figure. Where actual returns fall below it, which is common for savers holding predominantly low-yield assets, the taxpayer may file an adjustment, known by its Dutch abbreviation as an "UPL," to have the assessment recalculated on realised gains. This procedure has only been available online since the summer of 2024, and for straightforward portfolios of savings, bonds, or listed equities tracked by banks and brokers, van Gassen described it as a process individuals can typically complete without professional assistance.

The 2028 Reform

Capital Accrual Tax and What Changes Next

From 2028, the Dutch government plans to replace the current hybrid system with a capital accrual tax, which taxes unrealised gains on an annual basis. Parliament has agreed on this model as an interim step, with the stated ambition of eventually transitioning to a pure capital gains tax based on realised returns, as is standard practice across most developed economies. Van Gassen expressed cautious scepticism about the timeline for that further transition, citing the well-known observation that few things prove as durable as a temporary measure.

The practical implications of an annual unrealised gains tax are significant. Under such a system, an investor who held a volatile asset, cryptocurrency being the example discussed at length, through a strong year would owe tax on paper gains even if those gains had subsequently been wiped out by the time the tax fell due. Because tax declarations are filed and assessed with a lag, investors in assets that experience sharp reversals could find themselves compelled to sell at unfavourable prices simply to meet a tax liability based on gains that no longer exist. Van Gassen flagged this as one of the primary critiques of the incoming system, noting that the issue had attracted international attention, with commentary appearing across European financial media.

Two categories of asset have been carved out of the accrual regime. Real estate and shares in qualifying startup companies will be taxed under a separate capital gains framework when eventually sold, rather than on an annual unrealised basis. The precise definition of a "startup" for this purpose has not yet been finalised, leaving a degree of ambiguity for investors in early-stage private companies. Until 2028, the current transitional system remains in effect, meaning 2026 and 2027 assessments will continue to operate on the existing deemed-return basis, with the option to file for an actual-return adjustment where applicable.

Impact by Asset Class

Who Pays More, Who Pays Less

The conversation turned to which investor profiles stand to be most significantly affected by the shift to annual accrual taxation. Van Gassen's assessment was direct: those invested primarily in illiquid assets or in assets that do not generate recurring cash income will bear the heaviest burden. Growth-oriented equities, cryptocurrencies, and other assets whose returns are realised exclusively through price appreciation rather than through dividends, interest, or rent will create the most acute cash flow challenge, because the tax liability arrives annually but no cash has been received to fund it.

“

People who primarily invest in illiquid assets or anything that does not give a cash return, they're going to be hit hardest by this.

Ernst van Gassen, Tax Expert & Author

By contrast, investors whose portfolios are weighted toward income-generating assets are structurally better positioned under the new system. Savings accounts, money market funds, fixed-rate and floating-rate bonds, dividend-paying equities, and royalty streams all produce regular cash income against which the annual tax liability can be met without forcing a sale. Dovidenko observed that this dynamic could meaningfully shift demand toward stable, non-volatile instruments, creating favourable conditions in particular for shorter-duration bonds and inflation-linked securities whose prices move relatively little from year to year.

The existing current-system anomaly around bond classification was also highlighted. Under the transitional framework, bonds are grouped in the "other assets" basket alongside equities and crypto, carrying a deemed return of approximately 6%, against which a 36% Box 3 rate applies. For investors in bonds yielding around 2%, this implies a tax burden that effectively consumes the entire return, leaving the investor with zero net gain. This structural misalignment has already made tax-efficient bond investing in the Netherlands more complex, and the upcoming reform will not fully resolve that tension until a pure capital gains system is ultimately implemented.

Real Estate

Why Dutch Landlords Are Selling Up

A significant portion of the episode was devoted to the observable trend of Dutch investment property owners liquidating domestic holdings. Van Gassen attributed this to the convergence of two policy changes rather than to tax reform alone. The first is the Box 3 taxation environment. The second, and perhaps more immediately decisive, is the introduction of rent controls that cap the income landlords may charge on certain categories of property. For smaller landlords holding one to three investment properties, the combination of a capped rental yield against a high Dutch property valuation has in many cases rendered the investment economically unviable.

The proceeds of these sales have moved in several observable directions. Some capital has been redeployed into foreign real estate, with Spain and, to a lesser extent, Dubai cited as popular destinations attracting Dutch investor capital. Other former landlords have diversified into financial assets including listed equities, bonds, and savings accounts. Van Gassen also noted a discernible rise in alternative financing structures, including crowdfunding platforms that pool retail capital into lending to small businesses, an emerging category that presents its own complexities under the accrual tax given the challenge of marking illiquid loan positions to market annually.

Practical Application

Adapting Your Portfolio: A Framework for Dutch Investors

Van Gassen offered a structured set of considerations for households and expats seeking to navigate the transition in a tax-efficient manner. The overriding message was that inaction is the least defensible position: the new system will have materially different consequences depending on how a portfolio is constructed, and only a deliberate review will reveal whether any adjustment is warranted.

Summary

Key Takeaways