The personal income (flat) tax rate for income from equity is 30% and is calculated over a (progressive) deemed interest made on equity (equity tax is also referred to as: “box 3”). In brief equity can be summarized as (worldwide held) assets minus (worldwide held) debts. The point of departure is the value of the equity per beginning (January 1st) of the relevant tax year to be taken up in your personal income tax return. Based upon this value the deemed taxable income (benefit from savings and investments) is calculated.
The benefit from savings and investments is set at 0.13% of the part of the basis for savings and investments that belongs to yield class I, plus 5.60% of the part of that basis that belongs to yield class II. The height of the part of the basis for saving and investing that belongs to yield class I or yield class II, is determined on the basis of the following (2019 rates) table*:
An example of the above equity tax table: A single individual has an equity of € 130,360 per January 1st 2019. After applying the threshold a taxable equity remains of € 100,000. The actual income made on this equity is not relevant, nor is relevant how this equity has been invested, e.g. as bank savings and/or (partially) invested in stock. Both the taxable interest as well as the kind of investment is fictitious. The first € 71,650 is effectively deemed to have made an interest income of 1.935% (67% x 0.13% plus 33% x 5,6%) is € 1,386. The second part € 100,000 -/- € 71,650 = € 28,350 is effectively deemed to have made an interest income of 4.451% (21% x 0.13% plus 79% x 5,6%) is € 1,261. Total deemed interest is 2,647 x 30% tax = total amount on equity tax is € 794.
The idea behind the two different yield classes is that individuals with more equity are deemed to take more risk by investing in stock, yield class I is the low interest bank savings account and yield class II are the higher interest giving stocks. There is however no counter proof possibility within the law for individuals with a high amount on equity put in low interest bank saving accounts. Based upon case law dealing with double interest fictions, there may be a counter proof possibility in case the actual interest is at least 10% lower than the deemed interest. Court procedures are expected regarding the above explained equity deemed interest income system. Be sure to object on time.
For foreign tax residents the scope of Dutch taxable equity is limited to 1.
(rights related to) real estate held in The Netherlands, and 2. a (passive) profit share held in a Dutch company. Especially (rights related to) real estate held in The Netherlands will often be allocated for taxation to The Netherlands under most tax treaties.
It is therefore crucial (to avoid fines and interest) to do a timely annual personal income tax return filing. To this purpose TaxAble – as part of our tax return service – can serve as your representative at the Dutch tax office. Also our office can be held as your correspondence addres with the tax office, so we can be on top of any correspondence the tax office may send, such as assessments on which strict objection deadlines apply.
As an alternative to being taxed on deemed income from your equity, you could consider to incorporate your own company and be taxed on the actual interest you make on your equity.