Wealth tax: cough, dull, rather not. But if you are in the process of building wealth, you will have to delve into this a bit. And the fun (not)? it changes so often! Anyway, wealth tax in the Netherlands, what will change as of 2024? We’ve all heard it: stories about how unfair the system is, how the IRS calculates fictitious returns that have nothing to do with reality. But here at Elfin, we believe that knowledge is power. That’s why we dive into what’s going to change, what that means for you, and how you can arm yourself for the future.
The old system: what was the problem?
The old wealth tax system in the Netherlands has been much criticized. And rightly so. It relied on “notional returns,” which meant that the IRS assumed you made a certain return regardless of whether you actually did. If your savings were gathering dust in the bank or your investments were deep in the red, it didn’t matter. It felt like punishment for having ability, and it was clear that change was needed.
What will change in 2024?
After much criticism and even a slap on the wrist from the courts, change is finally coming. The new Box 3 system will be implemented in 2027. But until then, we are in what they call “transition years. In this, they will continue to use fictitious returns, but these will be more in line with reality. Also, the tax rate goes up, from 31% to 34%. That means: on the notional return, you will soon pay 34% tax. Need math? Read this article on taxes on investments. It seems a step in the right direction, but much is still unclear.
Exemptions and thresholds
Now to the point: what about exemptions? An exempt capital of €57,000 applies in 2023 and 2024. This means that you do not have to pay on your assets (savings and investments) up to €57,000. If you have a tax partner, this amount is doubled.
Impact on investing and saving
The changes affect not only your savings, but also your investments. Investing becomes potentially less attractive under the new system, especially for those of us who have already built up a nice wealth. But let’s face it: that your wealth is taxed is fair, because you make money with your money. By the way, we do think that this should reduce the tax on income! Either way, then, it is important to scrutinize your investment strategy.
Strategies to pay less
Yes, there are ways to optimize your taxable power. One is retirement investing. This is a great way to make your money work for you while reducing your taxable wealth. If you want to proactively influence your financial future, this is definitely something to consider. Why? If you start investing for retirement you can take advantage of tax benefits. Exactly how that works, we explain here.
Future developments
Tax reforms are still evolving. After 2027, wealth taxes will probably become really fair, based on your actual return. But as always with taxes, the devil is in the details. It is therefore important to stay alert to new developments.
Your plan of action
- Evaluate your current situation: Look at your assets and how they are divided between savings and investments.
- Consider strategic moves: Consider retirement investing or other ways to reduce your taxable assets. If necessary, spar with a financial expert affiliated with Elfin.
- Stay informed: Laws and regulations change. Make sure there are no surprises. Welcome to Elfin, then 😉
Conclusion: wealth tax in the Netherlands, what will change in 2024?
A lot, that changes. Exactly how it will play out, the future will tell. Knowing how your estate taxes work and the upcoming changes is crucial to making financial choices that benefit you. We are here with Elfin to support you on this journey.
