From the tax year 2010, all real estate held in box 3, is to be valued on the so called woz-value. In order to express the fact that letting decreases the value of real estate, a valuation scheme is included in the Income Tax Act as of the tax year 2010. Starting point of this table remains the woz-value, but this value is to be reduced by the so-called ‘leegwaarderatio’, which is a variable percentage of the woz value. This flat-rate correction may apply if you have let real estate wholly or partially during the year and on this rental the Dutch huurbeschermingsregels (protective legislation for tenants) apply. For most leased objects such rules will apply, with the exception of recreation homes for example.
The value of your rented out real estate is determined by the leegwaarderatio. The height of the leegwaarderatio depends on the annual amount on bare rent and the woz-value of the real estate. The annual rent is 12 times the monthly bare rent (excluding gas, water electricity, service expenses, etc.), as applicable at the beginning of the rental period for that calendar year. This amount on annual rent is to be divided by the woz-value of the leased premises and multiplied by 100. A percentage will follow which is than to be processed in the leegwaarderatio scheme. Is the annual bare rent as a percentage, for example, 2% of the woz-value, then a leegwaarderatio of 58% applies (scheme for the year 2012). The leegwaarderatio multiplied by the woz value indicates the value of the leased premises for box 3.
For the application of the leegwaarderatio it does not matter whether the real estate has been let for the full year or only part of the year. However in case the real estate has been empty for the full calendar year than in principle the woz-value – without any reduction – is the taxable value.
There are certain beneficial exceptions to the above mentioned valuation principle (woz-value multiplied by the leegwaarderatio on the basis of the annual rent). These exceptions include:
• commercial real estate;
• non legally splitted houses/apartments;
• annual ground lease.
Please contact us to learn more about these beneficial exceptions.
Many complaints are heard in the private property sector that the income tax on premises in box 3 is significantly higher from tax year 2010. As a softening of the new rules the leegwaarderatio, from tax year 2012, is adjusted so that, in comparison with the two previous years of 2010 and 2011, a higher correction on the woz-value may follow.
Important is only the bare rent as applicable at the beginning of the rental period for that calendar year; a possible rent increase during that year does not have to be taken into consideration.
Property leases to related parties – as family and/or acquaintances – against a non businesslike compensation, are considered on a fixed percentage of the leegwaarderatio.
If you have any questions arising from this article or do you want more information? Please feel free to contact us.