Have you become lost in the maze of legal rulings, draft laws and government decisions surrounding the Dutch Box 3 asset tax system? Luke Staden, founder of Staden Financial Management, explains the impact of the current system on your investment choices.

If you’ve pledged to get your investments sorted out in 2025, and are living in the Netherlands, there is one tricky issue you will need to overcome – Box 3. The system by which the Netherlands taxes capital gains, Box 3, was changed in 2024 following a Supreme Court which said it breached the European Convention of Human Rights – and no wonder.

Under the old system, the Netherlands would essentially assume a level of growth based on your net worth and guess your capital growth that year and tax you accordingly. This meant that if you were a low risk investor who favoured lower growth in exchange for predictable returns, you were likely to be taxed more than you should.

• Check out the Box 3 calculator
• Sign up for a seminar to reduce your Box 3 tax

It also meant that if you were a high-risk investor who had fluctuating returns year to year, there could be years you lose money through investment but still have to pay tax as if you’d earned money.

So, everyone, more or less, had reason to dislike it. Changes had to be made and the government plans to introduce a system of actual capital gains tax which taxes individuals on actual growth by 2027, although this is likely to be pushed back to 2028.

Capital gains tax

The new system they wish to introduce is likely to be based more on the German style capital gains taxation, which taxes the unrealised growth each year, rather than the UK system. In the UK you only pay capital gains tax when you sell an asset. In Germany, you are taxed based on the growth of assets you own, regardless of whether they are sold, which can lead to some investors being forced to sell assets, just to cover tax due on them.

Until an actual capital gains system is created, the Netherlands has introduced temporary bridging legislation.

This bridging legislation, in one word, is a catastrophe. It still assumes growth on assets but now divides your assets into three categories: Bank deposits, investments, and debts. In 2025, Bank deposits are assumed to grow by 1.44%, investments are assumed to grow by 5.88% and your debts owed are expected to grow by 2.62%.

To explain why this is a really bad idea I want to talk about one of the many consequences of this legislation – the impact on bonds.

Bonds and fixed interest savings accounts both return a fixed interest, with low growth over a period. They function similarly but I traditionally prefer bonds because they allow you to sell them with no penalty and provide protection against market crashes (you can sell them when stocks fall, normally for a bonus, then buy depreciated stocks).

Government bonds

The Dutch government wants people to buy Dutch government bonds. However, with the new bridging legislation, bonds are classed as investments with assumed growth of 5.88% and savings accounts are classed as bank deposits with an assumed growth of 1.44% which means that bonds are taxed roughly 4 times more than savings accounts, despite returning pretty similar returns.

At the end of December, Dutch government bonds return 2.09% – 2.72% annually, yet the government will assume a growth of 5.88% on those bonds and tax individuals up to 36% of that growth.

To put this into context, depending on your net worth, investing in bonds will cost you 1.6% more of your total investment than keeping the money in a checking account. So, if you invested in 6-month Dutch government bonds which yield 2.09%, the government can tax you up to 2.11% on the value of those bonds, depending on net worth. That means you could conceivably be paying more money than you make to lend money to the government.

The bridging regulation punishes bondholders, which is something no government wants to do, so it’s bad legislation. This is one of numerous examples of dire consequences created by the bridging legislation.

In the meantime, what should you be doing? I’m hosting some webinars and seminars this year to educate people on understanding the bridging legislation and how to take advantage of it by making clever investment decisions.

Staden Financial Management

Staden Financial Management was established to give great advice with integrity. We are committed to never accept commissions from funds to recommend them to our clients. Although a very common practice in the industry, I’ve always felt that this is a conflict of interest that puts the client last.

Our clients come to us because they want to protect their assets, build their wealth and are ultimately, in no small way, entrusting us with their future. When I give advice, I’m making a promise that what I’m recommending is what I believe is best for them. I turn people away when I felt that they could find a better option elsewhere.

A great example is people from the UK with missed national insurance contributions. Currently, you have until April 5 2025 to top up missed national insurance contributions going back to 2006.

There is, for most people, no better investment you can make. If you are choosing between investing with me and topping up NI contributions, I would be the first to tell you NI contributions should be your first choice.

Contact Luke Staden of Staden Financial Management to set up a meeting and discuss your particular financial needs or to find out more about 2025’s webinar series.