Netherlands plans taxing unrealized Bitcoin and investment gains under Box 3 reform starting 2028, raising liquidity concerns nationwide.
The Netherlands is preparing a major shift in how investment income is taxed. Lawmakers are moving toward taxing unrealized gains on Bitcoin, stocks, bonds, and other assets. This proposal comes after a vote in parliament to reform annual income tax returns and change the much-bemoaned Box 3 asset tax regime.
Netherlands Plans Annual Bitcoin Tax Starting 2028
The new structure would have investors paying tax on an annual basis depending on the fluctuations in the value of assets. This would be applicable even when there has not been sale of assets. The reform has a formal name, Wet werkelijk rendement Box 3 and will come into effect in 2028. It seeks to tax the actual returns and this is done by determining the difference between the value of an asset at the start and end of every year and also the income earned.
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This would mean that realized and unrealized gains would be taxed. The proposal is a great deviation of the existing system, which levies taxes on assumed or fictitious returns. Courts in the Netherlands had concluded in the past that such practice was illegal and the government had to come up with a new design that would be based on actual performance.
The lower house of parliament, the Tweede Kamer, discussed the amended Box 3 plan on Monday. As told by De Telegraaf, over 130 questions were brought up in the session. There were many doubts and concerns expressed by many lawmakers, but most of them indicated their readiness to back the bill. This is mainly due to financial pressure because it is approximated that in the event of postponing a new system, the treasury would incur a cost of approximately 2.3 billion every year.
Dutch Parliament Advances Plan to Tax Unrealized Investment Returns
One of the key issues is liquidity risks. Cryptocurrency and stock and bond investors might have to pay tax bills on paper gains without selling their assets. Opponents fear that this may compel people to sell assets just to pay taxes. This was an undesirable outcome as described by most parties in the Tweede Kamer.
The problem was recognized in the debate by Caretaker State Secretary of Taxation Eugene Heijnen. According to him, the government would rather tax returns when they are paid out. But he claimed that this system could not be technically implemented in 2028. Heijnen also emphasized that the government cannot do away with more delays.
Nevertheless, a number of parties will vote in favor despite the reservations. These are VVD, CDA, JA21, BBB and PVV. D66 and GroenLinks-PvdA are also in support. These parties generally advocate the taxation of unrealized gains claiming that it is less difficult to implement and eliminates massive losses in the budget. GroenLinks-PvdA member of parliament Luc Stultiens came up with the comment that capital gains would be better taxed.
The asset classes will be impacted unevenly by the reform. Investors in real estate can deduct expenses from their taxable profits. Property gains tax applies only when a gain is made, but a separate tax affects personal use of second homes.