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Both the Council of State and the Dutch Tax Administration are highly critical of the government’s current Box 3 plans. The Tax Administration says implementation in 2028 is unworkable. The Council therefore recommends postponing implementation until at least 2030. What does this mean for investors in gold and silver?
The Council published its advice today on the Box 3 amendment. The amendment modifies the proposed Box 3 legislation, under which the government plans to tax shares, bonds and ETFs only when they are sold from 2028 onwards.
On Friday, the Council’s “dictum C” assessment of the proposal had already been leaked to the FD. With this assessment, the Council of State advises the government not to submit the current Box 3 plans to the House of Representatives. The Council of State is the highest advisory body to the government and parliament. It assesses new legislation for feasibility and quality and, broadly speaking, assigns it a grade from A to D.
Although a dictum C still leaves room for improvement, according to the FD the advice effectively reads like a dictum D. In other words: do not proceed with this proposal and do not submit it to the House of Representatives.
The amendment was initially well received. This was because, under the previous Box 3 proposal, most of your assets would have been taxed on annual increases in value. That would mean paying tax on gains in the value of your shares even if you had not yet sold them. This form of taxation on unrealised gains was even criticised in The Washington Post. The amendment changes this by taxing only the actual gains on your investments. This is a capital gains tax.
There was, however, a catch. The amendment modifies existing legislation. According to the government, that legislation only allows shares, ETFs and bonds to be taxed on realised gains. Crypto and gold fall outside this framework. They would therefore continue to be taxed on annual increases in value, at least until 2030.
“Crypto, cognac, gold, silver or Pokémon cards — all the other things people might invest in — were not included in the legislation,” State Secretary for Finance Eerenberg said during the General Financial Deliberations.
Do you own listed shares through a bank? You are taxed on the gain when you sell them. Do you own physical gold or crypto yourself? You are taxed on the increase in value. This creates an unfair distinction between different types of investment, according to both the crypto and gold industries. In essence, it amounts to a form of ‘asset discrimination’, where investors are penalised based on the form in which they hold an investment.
Whether you hold an investment yourself or through a bank or broker therefore appears to matter more than what you actually invest in. This is partly related to the practical implementation of the legislation. It is simply easier to track changes in the value of shares held at a bank than those of gold and crypto held privately. (However, there are also practical problems here, as banks have already said that their systems cannot possibly be ready in 2028 to provide this information to the Dutch Tax Administration.)
The gold industry launched a petition calling for the fair treatment of precious metals. The petition is still active and can still be signed. The precious metals industry also sent a letter to the House Finance Committee challenging this unequal treatment. Holland Gold was one of the co-authors and signatories of the letter.
The Council of State has also taken note of the unequal treatment between shares, ETFs and bonds on the one hand, and gold and crypto on the other. According to the Council, the government makes this distinction without clear justification. The Council writes in its advice:
“In the amendment, the government has chosen, without clear justification, to temporarily distinguish between different types of assets by applying two different tax systems. This is vulnerable.”
The Council also questions whether the government’s arguments stand up to scrutiny. As explained above, this distinction is partly related to practical implementation. Investments that the government considers easy to track, such as shares held at a bank, could simply be taxed on realised capital gains more easily.
“The question is whether the practical implementation constraints are proportionate to the inequality resulting from the chosen hybrid system,” the Council writes. This is particularly relevant because the controversy surrounding Box 3 originally arose from the unequal taxation of savings and other investments. Taxing a deemed return that was higher than what savers had actually earned was found to violate property rights and the prohibition of discrimination in the 2021 Christmas ruling.
The chances of the new Box 3 system taking effect in 2028 have diminished considerably. The government also still lacks a majority for the 2027 Tax Plan, of which Box 3 and its funding are part. On Tuesday morning, the House Finance Committee will hold an additional meeting to determine how to proceed. The House of Representatives will debate the tax package on Wednesday, with a vote scheduled for 12 November. The Senate must then also approve the legislation, where there is currently no majority either. If the legislation is not passed before 31 December, the current Box 3 system will remain in place for at least another year. However, if the government follows the Council’s advice, the current system, including the counter-evidence provision, will also remain in place in 2028 and 2029.
For now, therefore, no final decision has been made and nothing has materially changed. We will continue to follow developments around Box 3 closely for you.
