Supreme Court ruled on box 3 income.
How to proceed now?
In June, the Supreme Court (HR) issued several rulings on how income from assets (box 3) are now calculated. According to the ruling, the calculation violates the European Convention on Human Rights (ECHR). According to the ruling, we should only tax the actual return on your assets if it is lower than the fictional return.
The current box 3 calculation method also violates non-discrimination and property rights
A new calculation method of box 3 income was developed (the Legal Restoration and Bridging Legislation) following the Supreme Court ruling in 2021. At that time the Supreme Court ruled that the old method violated the European Convention on Human Rights (ECHR). Now the Supreme Court is ruling that the new method also violates the prohibition of discrimination and property rights.
Counter-evidence program
The Secretary of State indicates that he has now defined the way to calculate the actual return according to the Supreme Court's methodology. The interpretation will be included in a bill that is expected to be presented to the House of Representatives in the first quarter of 2025.
This bill creates a statutory counterproof rule if the actual return in Box 3 - calculated according to the methodology of the Supreme Court - is lower than the fixed return. The aim is for the law to take effect on June 1, 2025.
Do you qualify for the counter-evidence program?
The secretary of state has also announced who may be eligible for the counter-evidence program.
For tax years starting in 2021, every taxpayer is eligible for the counter-evidence program.
For the tax year 2020, you are only eligible if your final assessment on December 21, 2021 was not yet irrevocably fixed (or at that time still had to be imposed) and if you file (or have already filed) a request for reduction in the period until the end of 2025.
For tax year 2019, the same applies as for 2020, with the difference that the request for reduction is only possible until no later than the end of 2024.
For the 2018 and 2017 tax years, you are only eligible for the counter-evidence program if your final assessment was included in the mass objection procedure or received after the Christmas ruling. You must also have filed a request for reduction for the 2018 tax year no later than December 31, 2023 and for the 2017 tax year no later than December 31, 2022.
Attention! The fact that you qualify for the counter-evidence program does not mean that your box 3 assessment will by definition soon be reduced. For this to happen, your actual return must be lower than the standard return. Keep in mind that what you may understand by actual return is different from the interpretation given by the Supreme Court in the recent box 3 rulings.
When you are allowed to submit the actual return, you will be notified
Starting Tuesday, Oct. 15, 2024, the Tax Office will begin sending out 2.6 million letters to people who qualify for the supplemental restoration of rights in box 3.
The letter states that they can make a credible case that their actual return is lower than the fictional return. From the summer of 2025, the form they can use to submit this will be available. Until then, recipients of this notice do not have to take any action. Letters will be sent between Oct. 15 and early November 2024.
Form actual returns
With this letter, the Tax Administration wants to provide more clarity to people who are eligible for additional legal recovery in box 3. It concerns the period 2017 up to and including the time the new system is officially implemented. Recipients of the letter are not yet required to provide data on their actual returns, this will be possible from the summer of 2025. The Tax Office is now continuing to work on the form Statement of Actual Return. This form offers assistance in calculating the actual return to minimize the risk of errors. The structured delivery enables automated processing. Work is also underway to implement this form in the systems. Given the scope of the rectification process, it will be phased over time.
Global timeline
When you receive the letter, you can wait for the next few months. Targeted communications will follow once it is time to report actual returns. To give recipients more clarity on what to expect, the Tax Office provides the following timeline:
October - November 2024: Affected parties will receive a letter explaining the additional legal recovery process.
From summer 2025: All those affected will receive an invitation for each tax year with details of the steps required.
Summer 2025: From this period, recipients will also be able to report their actual return per year using the Statement of Actual Return form on My Tax Service.
Request for reduction
A group of 150,000 people whose 2019 assessment has not yet been irrevocably determined will receive another letter. They must file a petition for reduction by Dec. 31, 2024, so that they retain the right to legal recompense. A standard petition will be sent as an attachment with the letter. They can justify this request next year using the Statement of Actual Return form. For the years 2020 and beyond, people do not need to do anything for the time being, as there can be no statute of limitations in 2024.
You continue to pay the amount of a preliminary assessment
Have you received a provisional assessment? Then you must pay the amount on your provisional assessment. You can request postponement of payment or a payment schedule for this provisional assessment.
If your box 3 income changes and it later transpires that you have paid too much tax, you will be refunded the excess amount paid.
Action?
You cannot use the counter-evidence program at this time. It must first be written into a bill and then passed by the House and Senate. The target effective date is June 1, 2025, and you probably won't be able to take action until then.
Attention! In some cases, you need to take early action anyway. Therefore, we recomend to contact us when you receive a final assessment. It is wise to safeguard your rights and object to the assessment on time. It may also still be necessary to submit a request for reduction against your irrevocably fixed 2019 assessment by 2024 at the latest.
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