Dutch 36% tax on savings and crypto raises fears of capital flight

The House of Representatives in the Netherlands has voted in favor of a controversial tax reform, the Actual Return in Box 3 Act. Under this new regulation, a uniform flat rate of 36% shall be imposed on the real returns derived from residents’ savings and investments, including cryptocurrencies, beginning January 1, 2028. 

Under the proposed Act, the Netherlands would overhaul its existing wealth tax system and tax investors on the actual increase in value of assets — even if those assets are not sold. Following this announcement, sources said the legislation passed with 75 votes, with firm support from 93 lawmakers, citing information from the House tally.  The proposal has ignited strong backlash from investors and analysts who warn it could drive capital out of the country.

The Netherlands initiates a significant step in its regulatory framework 

Several individuals expressed mixed reactions to the Dutch House of Representatives’ recent move. Reports indicate that the proposal would subject savings accounts, cryptocurrencies, most stock investments, and earnings from interest-bearing financial products to taxation, regardless of the asset’s disposition.

To further elaborate on this statement for better understanding, sources cited an example: if a Dutch resident holds shares that have appreciated by €10,000 over a year, the tax authority will deem that increase to be taxable income, regardless of whether the shares were sold.

Nonetheless, it is worth noting that real estate and shares in qualifying startups are subject to distinct regulatory frameworks. To support this claim, reports highlighted that the government will implement a capital gains approach for these assets. This meant that taxes on asset appreciation are only payable upon sale or disposal.

Even so, sources with knowledge of the situation who wished to remain anonymous due to the confidential nature of the matter unveiled that any regular income from these assets, such as rent or dividends, remains taxable annually upon receipt.

While this recent news marks a significant step for the country, representatives from parliament noted that the law-making body also passed an amendment to shorten the law’s review period from 5 years to 3 years. This change facilitates rapid adjustments should any issues arise during implementation.

Meanwhile, when reporters reached out to some parties that backed the bill for comments on the tax approach to unrealized gains, they noted that they do not support taxing unrealized gains. According to them, they supported the new legislation after the Dutch Supreme Court rejected the previous system.

This court ruling rendered the government unable to legally tax investment returns, resulting in an estimated annual loss of €2.3 billion in treasury revenue. Notably, for the bill to become law, it must receive the Senate’s approval.

Several individuals express disapproval of the new 36% tax

Several individuals have expressed disapproval of the Netherlands’ proposal. For instance, Denis Payre, CEO of the Belgian Internet logistics company Kiala, stated that “France did this in 1997 and experienced a huge number of entrepreneurs leaving the country.” 

Moreover, well-known crypto analyst Michaël van de Poppe perceived the proposal as “the dumbest thing I’ve seen in a long time,” further arguing that “The amount of people ready to leave the country is going to be crazy,” concurring with the sentiment of industry analysts and leaders.

While this discussion continued to gain traction in the country, Investing Visuals pointed out that an investor who starts with 10,000 euros ($11,871) and later decides to top up this amount by 1,000 euros per month for 40 years could have approximately 3,320,000 euros at the end of this period.

However, in light of the new 36% tax policy, this total declines to around 1,885,000 euros after 40 years. This situation implies a difference of 1,435,000 euros, according to reports from Investing Visuals.