They are still there, and with more: reports of disappointed people with taxed assets above the exemption (2023: €57,000 as a single person, €114,000 for tax partners). Despite a clear instruction from the highest Dutch court (the Supreme Court), our implementers of political policy continue to make tax rules that do not do justice to taxing actual returns. If we pierce through all those words, it turns out that it is mainly implementation problems at the tax authorities that make it impossible to realize the instruction at the moment. “Computer says no”.
Towards real returns
The bridging legislation (from taxing fictitious returns to taxing real returns) is intended to buy time. Initially, the changed taxation should take effect in 2026, but our expectations are already being prepared for postponement until (after) 2027. We are not convinced that your tax bill in a few years will be based on what you actually earned from your assets the previous year. Without getting bogged down in details: the IT infrastructure is simply not suitable for this. What will succeed is that there will be more asset classes, each with an average market return. The problem lies in the latter; It is certainly not your own return. So if you are extremely successful than “the market” yourself, you pay tax on an underestimated return, but unfortunately the reverse also applies. So we fear that the tax authorities will be busy with other things than calculating, checking and collecting taxes and informing taxpayers. The number of lawsuits will explode until the shore turns the ship here too.
The party ended for property?
In the bridging legislation, the tax burden for real estate investors is particularly unfortunate, and especially for those who have partly financed their real estate with borrowed money. This is exacerbated by government measures to regulate the rental market more. As a result, many investors in real estate with a small portfolio have started to divest their holdings (see also, in Dutch, Private investors sell their homes because of plan rent ceiling (fd.nl))). Certainly because the higher market interest rate for loans lowers the price of real estate, most retail investors see the natural moment for sale coincide with the departure of the incumbent tenant. So there are no panic sales, but the direction to the exit is clear for many.
Do it differently?
We see a “revival of the BV” as an instrument in asset management. The BV is short for the limited liability company (Besloten Vennootschap), fiscally separated from personal wealth. Actual returns are taxed. This is not only for real estate. Discussions are currently being held with several clients about how the BV can (again) meaningfully fit into wealth planning.