Netherlands to impose 36% tax on unrealized gains starting in 2028, crypto and stock investors face cash flow challenges

February 13 News, the Dutch House of Representatives approved the “Third Box Actual Return Act” (Wet werkelijk rendement box 3) this week, planning to reshape the country’s investment tax system starting January 2028. The new system will tax the “actual returns” of most investment assets such as stocks, cryptocurrencies, and bonds, at an approximate rate of 36%. This means that even if investors have not sold their assets, they are still required to pay annual taxes on unrealized gains.

Under the current framework, taxes are largely based on assumed yields, whereas the new law will directly tax real returns. This change is seen as a significant shift in the Dutch tax system. For highly volatile assets like cryptocurrencies, the mechanism of taxing unrealized gains could impose noticeable liquidity pressures. Some community members warn that if the market experiences a downturn, investors may face the risk of rapid erosion of paper profits after paying taxes.

It is important to note that real estate and shares in startups will be subject to different rules. These assets will still primarily be taxed based on capital gains upon actual sale, but income such as rent and dividends will still need to be taxed in the year they are received. This differentiated treatment is considered a buffer for long-term projects and the real economy.

To reduce systemic risks, the parliament also passed an amendment shortening the assessment cycle from five years to three years, allowing for quicker revisions if significant issues arise with the new system. Meanwhile, the ruling coalition composed of D66, VVD, and CDA has stated plans to eventually transition to a more traditional capital gains tax model, taxing only upon asset sale, with a draft bill expected to be submitted before the 2028 budget.

Although this transitional plan may ease cash flow pressures, government tax revenue could decrease in the short term. For investors, the policy developments and legislative progress over the next two years will be key variables influencing asset allocation.

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