To summarize the current Dutch personal income system: besides income from salary and income from own business (these are taxed quite high), income from investments (stocks, passive investments, real estate excluding your first home) is taxed quite low. The amount is simply a percentage based on the value (as per the start of the year) of your investments.
So in the Dutch tax system there is no difference between realized and unrealized gain. As such it doesn't matter when you buy/sell your investments. It doesn't impact your tax burden. The effect you get is that everyone's wealth just slowly erodes away, just like with inflation (unless your yield outpaces that).
It is essentially a wealth tax system. But I wouldn't call it low: currently, 6.17% fictional yield x 32% tax rate = 2% wealth tax rate - it is at the high end among countries with a wealth tax (https://en.wikipedia.org/wiki/Wealth_tax)
That seems like a reasonable approach. That's much preferable to a tax on realized gains and a tax on unrealized gains. In the US when you buy a mutual fund you're already paying a "tax", for example, Fidelity eats 0.83% if you invest in their FSLVX mutual fund [1].
That's not a tax, that's the expense ratio, which is basically describing fees captured by the fund manager. Funds accessible to Dutch investors involve similar ERs. It's not an alternative.
Calling the expense ratio a tax is like calling the labor cost of your car repair a tax. The expense ratio is what the fund manager is charging to cover their labor and expenses. It's not a tax on the transaction going to the government.
It can be thought of the same way, but not from the perspective that's under discussion. As such it doesn't really add anything except a new perspective. Why are you introducing it, what does it add?
One important thing the article omits is that there is threshold under which you don't pay anything in box 3. If you own less than 57.000 eur (or 114k for a family) you don't pay this tax.
The title here mostly doesn't match the article right? Quote: "But unlike the capital growth tax, capital gains tax will, in principle, only be levied at the time of realisation. This is usually when the relevant asset is sold, but also when immovable property exits Box 3 for another reason, such as emigration."
Looks like they're coining a new legal term "Capital Growth Tax", under which they are going to tax unrealized capital gains. I'm not aware of any other country that taxes them like that (besides wealth/exit taxes), so maybe they're the world's first here!
Some countries have wealth taxes - but they are usually flat or scale with wealth, not the yearly increase in wealth. Note that currently NL does de facto have a wealth tax in Box 3 system - shares are presumed to have a fictional fixed yield of around 5-6% per year on which they charge you income tax, so it works out to about 2% wealth tax.
For real estate, yes, but it's a quite different type of asset with a stable value that (mostly) only goes up.
What about stocks or crypto (the assets this new law targets)? They can have wild value fluctuations in a year. If your crypto or startup's options have +1M paper gain this year and turn worthless the next year, is it fair to ask people to cough up some 300-500k of real cash in tax?
Maybe? You can deduct losses.
If you have to sell a little of your crypto while the price is high to pay your taxes, then what have you lost after it goes to zero? At least the tax office get something out of it in tat case.
Not really, property taxes in the U.S. are revenue-driven (sometimes called “budget-driven”), not rate-driven. The taxing authority adds up how much money it needs, then apportions it based on property values.
> The bill regarding Box 3 introduces two main categories of taxation: capital growth tax and capital gains tax. The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings. Exchange results on bank balances in currencies other than EUR will also be taxed.
And normally unrealized capital gains on these sorts of assets aren't taxed.
I think in more general usage if you asked people what assets "taxing unrealized capital gains" would cover, you could get a basket if things like shares, real property, businesses, etc.
The article indicates that the Dutch government has decided to treat startups and real estate under the bucket "capital gains", and stuff under "capital growth".
So for an more informal standpoint, the title is a reasonable way to summarize what's happening to the layish person.
As I understand it most things like stocks with be under the capital growth scheme, taxed yearly, but they left a carve out for real-estate where it only is levied at sale/realization time.
Classic loophole. We tell ourselves this is to protect the little people who own homes, but the actual little people don’t have homes at all and rent. Meanwhile, anyone with money will get the picture invest all of it in real estate, once again enriching homeowner as well impoverishing the rest of us.
I totally get that it’s an understandable political strategy. I just think it’s in defensible as anything but a political strategy, and that it will ultimately make life worse for more people versus simply treating assets as assets, including homes. If homeowners do not wish their homes to be treated as assets, then they could simply forgo the right to profits, but I suspect they will not do that.
While I don’t disagree, I think it’s worth noting that the Netherlands has a pretty good level of social housing. Not perfect, but I think it’s 26% based on the stats link in the parent.
Also rent controls. Although these also tend to reward people who have been in the system longer (which _might_ be by design, but that’s just like my opinion)
In a way I agree with you that this will cause market distortion in the form of greater demand for real estate over eg. equities. But there are plenty of such tax distortions; for example many countries have favourable tax treatment for domestic dividends.
Regardless, I assume the logic behind this exception is that while you can easily sell a portion of your holdings of publicly traded stocks to cover your annual tax burden, you can't sell a portion of a house. You could of course finance, but that's going to disproportionately benefit lenders.
“The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings.”
About a year ago, Draghi released this report on European Competitiveness (https://commission.europa.eu/topics/competitiveness/draghi-r...). In it he says "A key reason for less efficient financial intermediation in Europe is that capital markets remain fragmented and flows of savings into capital markets are lower."
I don't have data readily to hand (and Draghi probably mentions this in the report, I can't remember), but anecdotally based on what I hear from many of my European friends, Europeans basically keep their savings in bank savings accounts. That means that there is less investment capital floating around, which in turn means that the tiny fraction that finds its way into innovation is in turn greatly diminished. Europeans are dependent on bank loans for funding, and banks want to see assets as security for their loans.
Policies like this would further disincentivize Europeans to invest in their own stock markets, further damaging the ability of Europeans to innovate.
> Europeans basically keep their savings in bank savings accounts.
USA is not much different. The wealthiest 10% of the U.S. population holds the vast majority of stock market wealth. Recent data shows this group owns around 90-93% of all stocks, with the top 1% controlling about half of the total household equity.
Many people hold cash in savings to prepare buying a house, paying for a child's college and more. IMHO, there is also less short-term need to invest your money as an adult.
If you're happy with your job and don't need the extra money (or risk), then why invest in the stock market?
That’s exactly the issue, there’s so many taxes and frictions that people don’t think it is worth it, and that’s one of the reasons why Europe is stagnating. Investment in business creates strong economies.
How are situations like lack of liquidity to pay the taxes handled?
i.e, As an employee you get stock options, which you exercise when you leave the startup. Then long before the company has a liquidity event the FMV shoots up because the business is doing well. How do you as a wage worker pay the taxes on your paper riches without a way to sell your shares?
I know several people that got cleaned out in IPOs partially due to how taxes work on no-liquidity (lockout) periods. If you IPO'd at $10 ($3 goes to the tax man), and when you can finally sell it 6mo later and stock is only worth about $3, the IRS makes more money than you.
Checkout what happened at Uber [0].
My cousin at Aurora borrowed money for his tax bill on IPO. I don't know the final numbers, but I hope he at least broke even.
Isn't this already a problem in many situations? If you exercise your options when you quit, pay only a very small strike price, but acquire private shares with a much larger fair market value, in the US at least you'd owe the IRS a lot of money but have no liquidity to pay it. Though this new tax would make that a yearly problem instead of just a problem when you exercise. (and mean that early exercise doesn't let you avoid it)
I think in that case, you, the hypothetical wage worker, got hoodwinked pretty effectively by the beancounters when they were able to get away with compensating you in contracts that are apparently worthless to you.
Do you think about the things you say, or is it just reflex?
Everyone working for a startup knows it may be 5 years to a liquidity event. We're all big boys, we work on uncertainty and expectation. If the government changes the rules halfway through, it's pretty brain-damaged to blame the beancounters for hoodwinking the employees, and not using their magic oracular powers to predict how the laws would change under their feet.
> The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings. Exchange results on bank balances in currencies other than EUR will also be taxed.
Ouch. I suppose this is supposed to combat the trend of share buybacks over dividends. Gonna seriously suck to be anyone Norwegian and having to sell stocks to pay for taxes on your unrealized gains.
Also if the euro dives as well during inflation its gonna be painful.
Ah ha, but it would for expat Norwegians living in the Netherlands ! If we're not worried about the minority Norwegian expat groups, what has the world come to.
Seems like it would also result in capital investors covering more year-to-year tax revenue, which could reduce some pressure on other tax payers.
In theory, capital gains should average out over time. But in practice, I think an increasing amount of wealth is being held and not realized over many decades.
It doesn’t help anyone that a few billion $ of gains will be taxed eventually if that is so far into the future that most citizens alive today will have passed away by then.
Such a policy will collapse the markets almost immediately. Everyone who would have held onto their assets will suddenly have to sell to cover taxes. This will cause a spiral of fire sales.
I don't get how this works in practice. I am not wealthy, I don't even own an house. But I have a decent salary and buy some stocks occasionally.
Most of my stocks are kinda volatile, so by paying taxes on unrealized gain I am taking much higher risk for owning them every year I don't sell. I would literally be paying taxes on money I don't own yet and could easily lose at the first mayor market upset.
Why don't governments take a portion of the stock as tax payment? They can cash it in (or not), but if all your money is in stocks, are they forcing you to sell the stock to pay them? i.e.: The tax shouldn't be in numerated in currency but stock. If it is currency, you are forced to measure a portion of the stock based on its current value and sell that much stock, if they take a fixed percent of the stock that amount could be a lot or not so much depending on the value of the stock when they tax you. The amount of tax you pay shouldn't depend on how well the stock is doing at taxation time.
Because within a few decades this would literally turn the Netherlands into the USSR. Compounding, but in reverse, away from individuals and into the inefficient state to manage and run all businesses.
I know we have a lot of communists in Europe (and on HN) who want to run that stupid experiment again, but even in Europe it’s a fringe view.
"A number of my friends who belong in the very high upper brackets have suggested to me on several occasions of late, that if I am reelected president, they will have to move to some other Nation because of high taxes here. Now, I will miss them very much." (audience breaks into laughter)
- FDR
(Spoiler alert: The rich always act like victims and whine about having to move.)
The Netherlands has had a form of "Box 3" wealth/unrealized capital gains tax for years. (This is just an update to existing policy.) So far, the country has not imploded.
We dodged a huge bullet in the US with this. We already pay _excessive_ amounts of federal income tax for extreme inefficiency, the vast majority of it simply being funneled into the pockets of the ultra wealthy.
This is extremely regressive and means that lower income people will be forced to shed their assets every year to avoid paying this unrealized gains tax. This means they will NEVER get the chance to accumulate generational wealth by holding onto stocks or other assets that have the capability of increasing tremendously like real estate.
It means they will need to sell their assets in order to pay this tax and only rich people will be able to afford holding onto assets long enough to become very rich.
It’s stupid, regressive and the Netherlands will learn a great lesson. The other thing that makes me laugh is that no other taxes are going down so this is a straight up tax hike on top of every other the Dutch pay.
What happens when you have a capital loss after paying taxes on the gains and then it goes back to the same value you paid taxes on? Do you still pay the tax? Or does it have to go higher than the last highest value you paid taxes on? That seems the fairest option.
This is a solved problem. When you sell a house in the US, you ahve to determine what your capital gain is for tax purposes. That includes all purchase and selling costs (eg agents fees, transfer taxes, etc). Those are all added to the purchase price to determine your cost basis.
The capital gain is simply the sale price minus the cost basis, which might be a loss.
So if you've paid unrealized capital gains taxes along the way, you either get credit for those taxes already paid (and possibly get a refund if you've overpaid) or they're simply added to the cost basis.
Countries that continue with fiscal plunder will only see those who can afford it flee, and after some time, popular uprisings from people who are fed up with Agenda2030 and still haven't figured out how to say no democratically.
If some populations do this, as recently happened in Switzerland, they will likely avoid uprisings.
I'm not sure why this is suddenly news. As far as I'm aware from my immigration inquiries, the Netherlands has had a "Box 3" unrealized capital gains tax for many years. This merely looks like an adjustment/improvement of the existing system, not some radical new policy.
They had essentially a wealth tax in Box 3 - your investments/savings are deemed to have a fixed fictional yield on which you pay income tax. Currently, 6.17% yield x 32% tax = 2% wealth tax. Hurts just a little bit, but it's a smooth, predictable cash flow.
They are replacing it with a much worse and untested economic policy - taxing unrealized capital gains every year. Not a big deal for relatively stable assets (real estate etc), but can explode in your face if you're into any risky volatile stuff (stocks, options, crypto) - they can crash next year, but your tax bill won't. Lack of liquidity can get you as well - you may have huge gains on paper, but for various reasons unable to sell in a reasonable timeframe and come up with equally huge amount of cash for the tax office - we're talking probably 30-50% tax here vs 2% under the old system. Double taxation if you have US passport - you're going to have to please both tax systems or pay double the tax.
The outcome I'd guess would be an exodus of the rich / upper middle class, and then they either scrap it or tighten further with exit taxes. Oh and they're also scrapping the coveted "30% ruling" for expats. Probably can forget about ever being able to FIRE in Netherlands.
So can you get unrealized capital losses to turn into tax credits? And can a person build up these credits to use in different years? If not, this is just a big tax increase to support continued government inefficiency instead of fixing spending and efficiency problems.
Yes, losses can be carried forward indefinitely:
> Losses within box 3 can be carried forward indefinitely and offset against future box 3 income. However, losses cannot be offset against income in other tax boxes in the Dutch personal income tax. To avoid administrative burdens, a minimum threshold of € 500 applies before a loss can be officially recognized.
Good. IMHO unrealized gains and profit shifting are two of the biggest problems in modern taxation that need to be addressed.
Many people will have heard about the Buy Borrow Die strategy by now. In case not, it's basically where you don't sell an asset (and thus have to pay taxes on the gain). You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than the interest rate. What's particularly gross about this is that many asets in many countries can be inherited by children on what's called a stepped up basis, meaning the base value for determining any capital gains taxes resets to the current market value when the owner dies. This is a massive tax break for the wealthy.
Companies have their own version of this. This has been somewhat (but not entirely) addressed in the US tax code now but it used to be that foreign corporate profits did not incur US corporate taxes as long as the money wasn't repatriated, meaning it stays overseas. But you know what you can do? That's right. Borrow money used those foreign profits as collateral and wait long enough for the US government to give you a tax holiday or to otherwise change the rules (which they did).
IMHO borrowing money against an asset should be realizing a gain and borrowing against foreign profits should be repatriating those profits.
Some will argue how you can't tax unrealized gains or it's not fair, we do it all the time. They're called property taxes.
Profit shifting is still a big problem. This is where, for example, tech companies would sell ads and services in the UK at "cost" to their Irish subsidiary, who would make all the profits. Almost nothing in UK profits where the tax rate is higher. Transfer pricing is (generally) illegal. Profit shifting isn't. What's the difference? Yes.
I think the EU and the US in particular need to start doing what I call profit apportionment, meaning if 50% of your revenue is booked in the US then 50% of your worldwide profits are taxable in the US.
You might say "they'll hide profits in subsidiaries" but really this is a solved problem already. We ahve ways of dealing with subsidiaries that are at arms length or not. We also have financial reporting to stock markets and there's really no reason tax authorities couldn't use published financial statements as a basis for taxation.
I agree that borrowing against unrealized gains is crap, it's lead to major economic divide. However, just make borrowing against unrealized gains illegal. Taxing unrealized gains is the wrong solution for a real problem.
Um, I don't know what information you're getting but this is easily Googleable eg [1]:
> The tax basis of property acquired by a beneficiary from someone who dies is ordinarily the property's fair market value at the date of the decedent's death.
> You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than the interest rate.
Gosh, that hopefully is doing a lot for you sentence lol. Risk based economies function on that "hopefully". To phrase this another way, "if you borrow money against an asset, invest it in the economy, and make more than the interest in returns, you can avoid selling the asset to cover the loan", which sounds a whole lot more sane. It's a bit scary to imagine a world in which borrowing against an asset could not be profitable as that would mean that all investment in the economy would halt, no?
I'm not even against this tax fwiw but you're glossing over some major details in how that tax deferral works. The major issue is how cap gains is handled on death.
> What's particularly gross about this is that many asets in many countries can be inherited by children on what's called a stepped up basis, meaning the base value for determining any capital gains taxes resets to the current market value when the owner dies. This is a massive tax break for the wealthy.
Right, I read your comment. You still clearly state that this is a loophole and when you then follow up to say "particularly gross" the clear implication is that it's a "gross loophole".
The ability to borrow against an asset is not a loophole.
Sometimes we have to place our hand on the stove to learn why we shouldn’t place our hand on the stove.
There’s a bizarre silliness to implementing this compared the relative ease of just increasing capital gains taxes (accrued capital gains are already tracked and reported!) to match income. Will just be a massive jobs program for the bean counters and consultants.
As someone living somewhat Netherlands adjacent, I will happily welcome all Dutch entrepreneurs and investors who wish to grow our local economy instead and not be forced to sell chunks of their company to the state over time.
To summarize the current Dutch personal income system: besides income from salary and income from own business (these are taxed quite high), income from investments (stocks, passive investments, real estate excluding your first home) is taxed quite low. The amount is simply a percentage based on the value (as per the start of the year) of your investments.
So in the Dutch tax system there is no difference between realized and unrealized gain. As such it doesn't matter when you buy/sell your investments. It doesn't impact your tax burden. The effect you get is that everyone's wealth just slowly erodes away, just like with inflation (unless your yield outpaces that).
But with this new law that all might change.
It is essentially a wealth tax system. But I wouldn't call it low: currently, 6.17% fictional yield x 32% tax rate = 2% wealth tax rate - it is at the high end among countries with a wealth tax (https://en.wikipedia.org/wiki/Wealth_tax)
The current rate is 36%.
That seems like a reasonable approach. That's much preferable to a tax on realized gains and a tax on unrealized gains. In the US when you buy a mutual fund you're already paying a "tax", for example, Fidelity eats 0.83% if you invest in their FSLVX mutual fund [1].
[1] https://fundresearch.fidelity.com/mutual-funds/summary/31612...
That's not a tax, that's the expense ratio, which is basically describing fees captured by the fund manager. Funds accessible to Dutch investors involve similar ERs. It's not an alternative.
Yes, the tax can be thought of an extra expense ratio. Same impact on you, at the end of the day.
Calling the expense ratio a tax is like calling the labor cost of your car repair a tax. The expense ratio is what the fund manager is charging to cover their labor and expenses. It's not a tax on the transaction going to the government.
No, I am saying the tax is like an additional expense ratio.
It can be thought of the same way, but not from the perspective that's under discussion. As such it doesn't really add anything except a new perspective. Why are you introducing it, what does it add?
You don't have to worry about tax implications when timing stock sale.
One important thing the article omits is that there is threshold under which you don't pay anything in box 3. If you own less than 57.000 eur (or 114k for a family) you don't pay this tax.
The title here mostly doesn't match the article right? Quote: "But unlike the capital growth tax, capital gains tax will, in principle, only be levied at the time of realisation. This is usually when the relevant asset is sold, but also when immovable property exits Box 3 for another reason, such as emigration."
Looks like they're coining a new legal term "Capital Growth Tax", under which they are going to tax unrealized capital gains. I'm not aware of any other country that taxes them like that (besides wealth/exit taxes), so maybe they're the world's first here!
Some countries have wealth taxes - but they are usually flat or scale with wealth, not the yearly increase in wealth. Note that currently NL does de facto have a wealth tax in Box 3 system - shares are presumed to have a fictional fixed yield of around 5-6% per year on which they charge you income tax, so it works out to about 2% wealth tax.
> I'm not aware of any other country that taxes them like that (besides wealth/exit taxes), so maybe they're the world's first here!
Real estate taxes.
> not the yearly increase in wealth.
Real estate taxes.
For real estate, yes, but it's a quite different type of asset with a stable value that (mostly) only goes up.
What about stocks or crypto (the assets this new law targets)? They can have wild value fluctuations in a year. If your crypto or startup's options have +1M paper gain this year and turn worthless the next year, is it fair to ask people to cough up some 300-500k of real cash in tax?
Maybe? You can deduct losses. If you have to sell a little of your crypto while the price is high to pay your taxes, then what have you lost after it goes to zero? At least the tax office get something out of it in tat case.
Yes, and we absolutely should.
Not really, property taxes in the U.S. are revenue-driven (sometimes called “budget-driven”), not rate-driven. The taxing authority adds up how much money it needs, then apportions it based on property values.
I think there are some other jurisdictions that require Mark to Market for tax purposes, at least in some situations.
In the US, certain traders can elect to mark to market [1].
[1] https://www.irs.gov/taxtopics/tc429
> I'm not aware of any other country that taxes them like
My home's property taxes operate this way. The county calculates the current value of my home and charges me a % of that in taxes every year.
Germany is also already taxing unrealized capital gains of funds (Vorabpauschale).
Yeah but the previous paragraph says
> The bill regarding Box 3 introduces two main categories of taxation: capital growth tax and capital gains tax. The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings. Exchange results on bank balances in currencies other than EUR will also be taxed.
And normally unrealized capital gains on these sorts of assets aren't taxed.
I think in more general usage if you asked people what assets "taxing unrealized capital gains" would cover, you could get a basket if things like shares, real property, businesses, etc.
The article indicates that the Dutch government has decided to treat startups and real estate under the bucket "capital gains", and stuff under "capital growth".
So for an more informal standpoint, the title is a reasonable way to summarize what's happening to the layish person.
As I understand it most things like stocks with be under the capital growth scheme, taxed yearly, but they left a carve out for real-estate where it only is levied at sale/realization time.
Classic loophole. We tell ourselves this is to protect the little people who own homes, but the actual little people don’t have homes at all and rent. Meanwhile, anyone with money will get the picture invest all of it in real estate, once again enriching homeowner as well impoverishing the rest of us.
It's true that it's a carve out, and current young generations are having huge problems getting homes in a lot of the world.
But in the Netherlands, the overall home ownership rate is still about 70 percent (https://ec.europa.eu/eurostat/databrowser/view/ilc_lvho02__c... might need to drill down a little).
In the US it's 65 percent.
Carve outs for home owners are some of the most understandable political strategies across the developed world.
I totally get that it’s an understandable political strategy. I just think it’s in defensible as anything but a political strategy, and that it will ultimately make life worse for more people versus simply treating assets as assets, including homes. If homeowners do not wish their homes to be treated as assets, then they could simply forgo the right to profits, but I suspect they will not do that.
While I don’t disagree, I think it’s worth noting that the Netherlands has a pretty good level of social housing. Not perfect, but I think it’s 26% based on the stats link in the parent. Also rent controls. Although these also tend to reward people who have been in the system longer (which _might_ be by design, but that’s just like my opinion)
In a way I agree with you that this will cause market distortion in the form of greater demand for real estate over eg. equities. But there are plenty of such tax distortions; for example many countries have favourable tax treatment for domestic dividends.
Regardless, I assume the logic behind this exception is that while you can easily sell a portion of your holdings of publicly traded stocks to cover your annual tax burden, you can't sell a portion of a house. You could of course finance, but that's going to disproportionately benefit lenders.
Home ownership is and would continue be taxed in box 1, so that’s not even superficially the reason for carving out real estate.
Box 3 on real estate only come in play for home 2+, and rental properties.
Only 29% of people in the Netherlands rent and that number is decreasing.
Yes, exactly, this policy will result in 29% of people who don’t own real subsidizing the 70% who do.
Ok, we've put box 3 in the title above. Thanks!
(Submitted title was "Netherlands to start taxing unrealized capital gains yearly from 2028")
“The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings.”
About a year ago, Draghi released this report on European Competitiveness (https://commission.europa.eu/topics/competitiveness/draghi-r...). In it he says "A key reason for less efficient financial intermediation in Europe is that capital markets remain fragmented and flows of savings into capital markets are lower."
I don't have data readily to hand (and Draghi probably mentions this in the report, I can't remember), but anecdotally based on what I hear from many of my European friends, Europeans basically keep their savings in bank savings accounts. That means that there is less investment capital floating around, which in turn means that the tiny fraction that finds its way into innovation is in turn greatly diminished. Europeans are dependent on bank loans for funding, and banks want to see assets as security for their loans.
Policies like this would further disincentivize Europeans to invest in their own stock markets, further damaging the ability of Europeans to innovate.
> Europeans basically keep their savings in bank savings accounts.
USA is not much different. The wealthiest 10% of the U.S. population holds the vast majority of stock market wealth. Recent data shows this group owns around 90-93% of all stocks, with the top 1% controlling about half of the total household equity.
Many people hold cash in savings to prepare buying a house, paying for a child's college and more. IMHO, there is also less short-term need to invest your money as an adult.
If you're happy with your job and don't need the extra money (or risk), then why invest in the stock market?
That’s exactly the issue, there’s so many taxes and frictions that people don’t think it is worth it, and that’s one of the reasons why Europe is stagnating. Investment in business creates strong economies.
How are situations like lack of liquidity to pay the taxes handled?
i.e, As an employee you get stock options, which you exercise when you leave the startup. Then long before the company has a liquidity event the FMV shoots up because the business is doing well. How do you as a wage worker pay the taxes on your paper riches without a way to sell your shares?
I guess there would be all sorts of megacorps happy to loan you money for this with your assets as collateral.
Remember London and Amsterdam have extremely strong finance industry lobbying, and that shows up in their lawmaking.
I know several people that got cleaned out in IPOs partially due to how taxes work on no-liquidity (lockout) periods. If you IPO'd at $10 ($3 goes to the tax man), and when you can finally sell it 6mo later and stock is only worth about $3, the IRS makes more money than you.
Checkout what happened at Uber [0].
My cousin at Aurora borrowed money for his tax bill on IPO. I don't know the final numbers, but I hope he at least broke even.
Real examples include: $GRAB, $AUR, $UBER
[0] - https://www.cnbc.com/2020/08/28/nearly-200-uber-employees-su...
[dead]
Isn't this already a problem in many situations? If you exercise your options when you quit, pay only a very small strike price, but acquire private shares with a much larger fair market value, in the US at least you'd owe the IRS a lot of money but have no liquidity to pay it. Though this new tax would make that a yearly problem instead of just a problem when you exercise. (and mean that early exercise doesn't let you avoid it)
I think in that case, you, the hypothetical wage worker, got hoodwinked pretty effectively by the beancounters when they were able to get away with compensating you in contracts that are apparently worthless to you.
Do you think about the things you say, or is it just reflex?
Everyone working for a startup knows it may be 5 years to a liquidity event. We're all big boys, we work on uncertainty and expectation. If the government changes the rules halfway through, it's pretty brain-damaged to blame the beancounters for hoodwinking the employees, and not using their magic oracular powers to predict how the laws would change under their feet.
5 years used to be true 15 years ago. IPOs are happening much later now, probably 10+ years, if you're lucky
You need to exit the Netherlands
Usually wealth taxes like this only applies to people with (net) assets in excess of a fairly large amount like 50m or 100m, etc.
Skimming the article I couldn’t tell whether that’s the case here.
If not, it seems like it would have pretty bad implications for the average person who isn’t super wealthy but who are trying to build wealth.
Sadly the threshold for wealth tax in the Netherlands has always been abysmally low - even in 2025, the untaxed “wealth” is only 50k.
The people voting for these laws don't want anyone to be wealthy. It's a race to the bottom
> The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings. Exchange results on bank balances in currencies other than EUR will also be taxed.
Ouch. I suppose this is supposed to combat the trend of share buybacks over dividends. Gonna seriously suck to be anyone Norwegian and having to sell stocks to pay for taxes on your unrealized gains.
Also if the euro dives as well during inflation its gonna be painful.
This won’t obviously apply to Norwegians, as it’s for the Netherlands.
Ah ha, but it would for expat Norwegians living in the Netherlands ! If we're not worried about the minority Norwegian expat groups, what has the world come to.
Seems like it would also result in capital investors covering more year-to-year tax revenue, which could reduce some pressure on other tax payers.
In theory, capital gains should average out over time. But in practice, I think an increasing amount of wealth is being held and not realized over many decades.
It doesn’t help anyone that a few billion $ of gains will be taxed eventually if that is so far into the future that most citizens alive today will have passed away by then.
Such a policy will collapse the markets almost immediately. Everyone who would have held onto their assets will suddenly have to sell to cover taxes. This will cause a spiral of fire sales.
The demonym of those from the Netherlands is 'Dutch'
I totally misread the title as Norway, guess I was thinking about the sovereign wealth fund.
Housing?
I don't get how this works in practice. I am not wealthy, I don't even own an house. But I have a decent salary and buy some stocks occasionally.
Most of my stocks are kinda volatile, so by paying taxes on unrealized gain I am taking much higher risk for owning them every year I don't sell. I would literally be paying taxes on money I don't own yet and could easily lose at the first mayor market upset.
Why don't governments take a portion of the stock as tax payment? They can cash it in (or not), but if all your money is in stocks, are they forcing you to sell the stock to pay them? i.e.: The tax shouldn't be in numerated in currency but stock. If it is currency, you are forced to measure a portion of the stock based on its current value and sell that much stock, if they take a fixed percent of the stock that amount could be a lot or not so much depending on the value of the stock when they tax you. The amount of tax you pay shouldn't depend on how well the stock is doing at taxation time.
Because within a few decades this would literally turn the Netherlands into the USSR. Compounding, but in reverse, away from individuals and into the inefficient state to manage and run all businesses.
I know we have a lot of communists in Europe (and on HN) who want to run that stupid experiment again, but even in Europe it’s a fringe view.
It is difficult to imagine a more catastrophically destructive economic policy.
If this is actually implemented, the Dutch are toast.
"A number of my friends who belong in the very high upper brackets have suggested to me on several occasions of late, that if I am reelected president, they will have to move to some other Nation because of high taxes here. Now, I will miss them very much." (audience breaks into laughter)
- FDR
(Spoiler alert: The rich always act like victims and whine about having to move.)
The Netherlands has had a form of "Box 3" wealth/unrealized capital gains tax for years. (This is just an update to existing policy.) So far, the country has not imploded.
Time to update your priors.
That's one of the reasons the housing market is so inflated. The goverment forces people to invest into housing.
We dodged a huge bullet in the US with this. We already pay _excessive_ amounts of federal income tax for extreme inefficiency, the vast majority of it simply being funneled into the pockets of the ultra wealthy.
When you say excessive amounts of federal income tax, do you mean each tax payer, or the overall amount?
The top 10% of taxpayers contribute 72% of all income tax, so 90% of them aren't really contributing a lot, so per tax payer it's not a lot.
The overall amount is staggering, yes.
So how does that work for assets with unclear value?
This is extremely regressive and means that lower income people will be forced to shed their assets every year to avoid paying this unrealized gains tax. This means they will NEVER get the chance to accumulate generational wealth by holding onto stocks or other assets that have the capability of increasing tremendously like real estate.
It means they will need to sell their assets in order to pay this tax and only rich people will be able to afford holding onto assets long enough to become very rich.
It’s stupid, regressive and the Netherlands will learn a great lesson. The other thing that makes me laugh is that no other taxes are going down so this is a straight up tax hike on top of every other the Dutch pay.
What happens when you have a capital loss after paying taxes on the gains and then it goes back to the same value you paid taxes on? Do you still pay the tax? Or does it have to go higher than the last highest value you paid taxes on? That seems the fairest option.
Or, if you have a capital loss this year after paying taxes on gains last year, can you carry back the deduction to last year?
This is a solved problem. When you sell a house in the US, you ahve to determine what your capital gain is for tax purposes. That includes all purchase and selling costs (eg agents fees, transfer taxes, etc). Those are all added to the purchase price to determine your cost basis.
The capital gain is simply the sale price minus the cost basis, which might be a loss.
So if you've paid unrealized capital gains taxes along the way, you either get credit for those taxes already paid (and possibly get a refund if you've overpaid) or they're simply added to the cost basis.
Maybe they will treat them similar to how they treat realized capital losses currently
ideally you should get a deduction in later years
Countries that continue with fiscal plunder will only see those who can afford it flee, and after some time, popular uprisings from people who are fed up with Agenda2030 and still haven't figured out how to say no democratically.
If some populations do this, as recently happened in Switzerland, they will likely avoid uprisings.
well this will probably cause an exit of businesses
Businessmen - it's for personal income taxes. I don't think it affects corporate taxes. Yet.
as worded is this tax not levied on any entity holding assets that can appreciate in value (businesses can hold stock too)?
Don't IKEA have a tax-free "design foundation" over there?
I'm not sure why this is suddenly news. As far as I'm aware from my immigration inquiries, the Netherlands has had a "Box 3" unrealized capital gains tax for many years. This merely looks like an adjustment/improvement of the existing system, not some radical new policy.
They had essentially a wealth tax in Box 3 - your investments/savings are deemed to have a fixed fictional yield on which you pay income tax. Currently, 6.17% yield x 32% tax = 2% wealth tax. Hurts just a little bit, but it's a smooth, predictable cash flow.
They are replacing it with a much worse and untested economic policy - taxing unrealized capital gains every year. Not a big deal for relatively stable assets (real estate etc), but can explode in your face if you're into any risky volatile stuff (stocks, options, crypto) - they can crash next year, but your tax bill won't. Lack of liquidity can get you as well - you may have huge gains on paper, but for various reasons unable to sell in a reasonable timeframe and come up with equally huge amount of cash for the tax office - we're talking probably 30-50% tax here vs 2% under the old system. Double taxation if you have US passport - you're going to have to please both tax systems or pay double the tax.
The outcome I'd guess would be an exodus of the rich / upper middle class, and then they either scrap it or tighten further with exit taxes. Oh and they're also scrapping the coveted "30% ruling" for expats. Probably can forget about ever being able to FIRE in Netherlands.
(June 2025)
So can you get unrealized capital losses to turn into tax credits? And can a person build up these credits to use in different years? If not, this is just a big tax increase to support continued government inefficiency instead of fixing spending and efficiency problems.
Yes, losses can be carried forward indefinitely: > Losses within box 3 can be carried forward indefinitely and offset against future box 3 income. However, losses cannot be offset against income in other tax boxes in the Dutch personal income tax. To avoid administrative burdens, a minimum threshold of € 500 applies before a loss can be officially recognized.
https://www.loyensloeff.com/insights/news--events/news/legis...
No this only goes one way, of course.
Good. IMHO unrealized gains and profit shifting are two of the biggest problems in modern taxation that need to be addressed.
Many people will have heard about the Buy Borrow Die strategy by now. In case not, it's basically where you don't sell an asset (and thus have to pay taxes on the gain). You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than the interest rate. What's particularly gross about this is that many asets in many countries can be inherited by children on what's called a stepped up basis, meaning the base value for determining any capital gains taxes resets to the current market value when the owner dies. This is a massive tax break for the wealthy.
Companies have their own version of this. This has been somewhat (but not entirely) addressed in the US tax code now but it used to be that foreign corporate profits did not incur US corporate taxes as long as the money wasn't repatriated, meaning it stays overseas. But you know what you can do? That's right. Borrow money used those foreign profits as collateral and wait long enough for the US government to give you a tax holiday or to otherwise change the rules (which they did).
IMHO borrowing money against an asset should be realizing a gain and borrowing against foreign profits should be repatriating those profits.
Some will argue how you can't tax unrealized gains or it's not fair, we do it all the time. They're called property taxes.
Profit shifting is still a big problem. This is where, for example, tech companies would sell ads and services in the UK at "cost" to their Irish subsidiary, who would make all the profits. Almost nothing in UK profits where the tax rate is higher. Transfer pricing is (generally) illegal. Profit shifting isn't. What's the difference? Yes.
I think the EU and the US in particular need to start doing what I call profit apportionment, meaning if 50% of your revenue is booked in the US then 50% of your worldwide profits are taxable in the US.
You might say "they'll hide profits in subsidiaries" but really this is a solved problem already. We ahve ways of dealing with subsidiaries that are at arms length or not. We also have financial reporting to stock markets and there's really no reason tax authorities couldn't use published financial statements as a basis for taxation.
I agree that borrowing against unrealized gains is crap, it's lead to major economic divide. However, just make borrowing against unrealized gains illegal. Taxing unrealized gains is the wrong solution for a real problem.
> This is a massive tax break for the wealthy.
Do you have a reference for this?
Any sort of gift or inheritance transfers the cost basis as far as I know.
Um, I don't know what information you're getting but this is easily Googleable eg [1]:
> The tax basis of property acquired by a beneficiary from someone who dies is ordinarily the property's fair market value at the date of the decedent's death.
[1]: https://www.fidelity.com/learning-center/personal-finance/wh...
Unless you get to carry over unrealized capital losses , this taxation regime is highly regressive.
I would prefer they give a straight up tax refund as opposed to a credit you carry over.
> IMHO borrowing money against an asset should be realizing a gain and borrowing against foreign profits should be repatriating those profits.
Why is this necessary when the spending of the borrowed money is itself taxed?
You only pay sales and consumption taxes when you spend borrowed money. You're not paying any income or capital gains taxes on it.
> You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than the interest rate.
Gosh, that hopefully is doing a lot for you sentence lol. Risk based economies function on that "hopefully". To phrase this another way, "if you borrow money against an asset, invest it in the economy, and make more than the interest in returns, you can avoid selling the asset to cover the loan", which sounds a whole lot more sane. It's a bit scary to imagine a world in which borrowing against an asset could not be profitable as that would mean that all investment in the economy would halt, no?
I'm not even against this tax fwiw but you're glossing over some major details in how that tax deferral works. The major issue is how cap gains is handled on death.
Let me quote from my own comment:
> What's particularly gross about this is that many asets in many countries can be inherited by children on what's called a stepped up basis, meaning the base value for determining any capital gains taxes resets to the current market value when the owner dies. This is a massive tax break for the wealthy.
Right, I read your comment. You still clearly state that this is a loophole and when you then follow up to say "particularly gross" the clear implication is that it's a "gross loophole".
The ability to borrow against an asset is not a loophole.
Countries raise taxes on wealth when they have high levels of debt and disappointing growth.
Sometimes we have to place our hand on the stove to learn why we shouldn’t place our hand on the stove.
There’s a bizarre silliness to implementing this compared the relative ease of just increasing capital gains taxes (accrued capital gains are already tracked and reported!) to match income. Will just be a massive jobs program for the bean counters and consultants.
As someone living somewhat Netherlands adjacent, I will happily welcome all Dutch entrepreneurs and investors who wish to grow our local economy instead and not be forced to sell chunks of their company to the state over time.
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