Can you avoid paying 'wealth tax' (Box 3) in NL?

[mikestachurski]

Hi

I was wondering if someone have explore setting up trust in UK to avoid paying box 3 wealth tax in NL?

To be more specific I used to live in NL till 2021 and I was covered by 30% ruling (didn't have to declare worldwide assets and pay taxes on them).

I left NL in Dec 2021 and I am currently traveling and considering moving back to NL but if I return I will have to start paying box 3 (wealth tax in NL).

I was considering doing following:

(1) Open a trust in UK where I will be a settlor and my son will be a beneficiary
(2) Put my assets to the trust so they are not my or my son assets anymore
(3) Come back to NL and continue living and working there

By doing so I think I could 'protect' me/my son to pay wealth tax on the part of the assets I would put into the trust which sooner or later will be his.

Anyone explored something like that? Or any other scenarios?

 

[FantomOffshore]

No, as someone who has studied Dutch tax law (for some years, not finished) something like that will definitely be considered artificial by the Belastingdienst if they find out. Your best bet is to put about 1.2 million into a real estate company which you can then hand-over tax-free to your son by utilizing the BOR (Bijzondere bedrijfsopvolgingsregeling), keep in mind that you can only do this once you have died. Circa 1.1 million is tax free to hand over by gifting a company, after 1.1 million 83% is not-taxed so still a decent deal.

Right now the wealth taxes are still insanely low irregardless of your income, to be fair they are almost non-existent since The Netherlands does not have a capital-gains tax. But there are plans to drastically increase those for people who have more than half a million so keep that in mind. I personally don't think we will see it this decade since the VVD keeps being the biggest party.

 

[Konstanz]

Hi

I was wondering if someone have explore setting up trust in UK to avoid paying box 3 wealth tax in NL?

To be more specific I used to live in NL till 2021 and I was covered by 30% ruling (didn't have to declare worldwide assets and pay taxes on them).

I left NL in Dec 2021 and I am currently traveling and considering moving back to NL but if I return I will have to start paying box 3 (wealth tax in NL).

I was considering doing following:

(1) Open a trust in UK where I will be a settlor and my son will be a beneficiary
(2) Put my assets to the trust so they are not my or my son assets anymore
(3) Come back to NL and continue living and working there

By doing so I think I could 'protect' me/my son to pay wealth tax on the part of the assets I would put into the trust which sooner or later will be his.

Anyone explored something like that? Or any other scenarios?

if you can continue 30% ruling somehow it's very good option. Actually, it's not spoken a lot about it, but it's one of the best options in EU to live tax free for 5 years.

 

[Mr Gus]

In your Dutch tax return you have to give up any assets you own also assets held abroad, if you select no and it turns out you did have, you will run into problems, not only for tax evasion but also for doing a wrong tax return, both are punished pretty harsh.

I don't see why you would want to avoid paying the box 3 tax, it's not that bad... But yhere are some ways to avoid it.. You can place the money into a B.V. where only the gains are taxed at 37% up to 400K.

Another option is buying a house with an interest only mortage, your house will be taxed in BOX1 and the loan will be placed in BOX3, you can then subtract the loan from your wealth.

1M in wealth.
900K loan.
leaves you with 100K to be taxed in BOX 3 which is pretty much 0 tax.

Now a days with all the regulations and laws put into place in the Netherlands against tax avoidance no body is touching their hands on it anymore, even if you are actually doing everything according to the law the Dutch tax authorities will still ruin your live, they don't care. When you live in the Netherlands just pay the taxes or else leave to somewhere else.

 

[FantomOffshore]

In your Dutch tax return you have to give up any assets you own also assets held abroad, if you select no and it turns out you did have, you will run into problems, not only for tax evasion but also for doing a wrong tax return, both are punished pretty harsh.

I don't see why you would want to avoid paying the box 3 tax, it's not that bad... But yhere are some ways to avoid it.. You can place the money into a B.V. where only the gains are taxed at 37% up to 400K.

Another option is buying a house with an interest only mortage, your house will be taxed in BOX1 and the loan will be placed in BOX3, you can then subtract the loan from your wealth.

1M in wealth.
900K loan.
leaves you with 100K to be taxed in BOX 3 which is pretty much 0 tax.

Now a days with all the regulations and laws put into place in the Netherlands against tax avoidance no body is touching their hands on it anymore, even if you are actually doing everything according to the law the Dutch tax authorities will still ruin your live, they don't care. When you live in the Netherlands just pay the taxes or else leave to somewhere else.

This, the Dutch tax authorities are ruthless and will prosecute you for minor amounts of money and and even when their case is decently contested in the first place . Adding to that it can take ages for your case to be finished leading to a lot of unnecessary stress. And yes, I too cannot see why one would want to go through hoops just to avoid paying the box 3 tax. If all your wealth is in box-3, the Netherlands is an incredibly nice country to live in. The big disharmony between box-1 and box-3 is what makes a decent amount of talented younger people wanting to leave that country.

 

[johndunham]

Another option is buying a house with an interest only mortage, your house will be taxed in BOX1 and the loan will be placed in BOX3, you can then subtract the loan from your wealth.

1M in wealth.
900K loan.
leaves you with 100K to be taxed in BOX 3 which is pretty much 0 tax.

Correct me if I'm wrong, but I think that law has changed several years ago. You can't have the subtraction with an interest only mortgage.

 

[FantomOffshore]

Correct me if I'm wrong, but I think that law has changed several years ago. You can't have the subtraction with an interest only mortgage.

This is true, you can only subtract when you have a mortgage that:

1. Is paid off monthly.
2. Is paid off within 30 years.
3. The mortgage is on your "main" home so where you live in.

An interest-only mortgage is not paid off so does not qualify for the subtraction.

 

[Mr Gus]

This is true, you can only subtract when you have a mortgage that:

1. Is paid off monthly.
2. Is paid off within 30 years.
3. The mortgage is on your "main" home so where you live in.

An interest-only mortgage is not paid off so does not qualify for the subtraction.

Correct me if I'm wrong, but I think that law has changed several years ago. You can't have the subtraction with an interest only mortgage.

Yes you can't subtract it from box1 anymore but you CAN subtract it from box3.

 

[FantomOffshore]

Yes you can't subtract it from box1 anymore but you CAN subtract it from box3.

A not so minor detail I forgot . What would interest be on a mortgage like that though? Would it be worth the hassle and risk instead of just paying the wealth tax you think?

 

[Mr Gus]

A not so minor detail I forgot . What would interest be on a mortgage like that though? Would it be worth the hassle and risk instead of just paying the wealth tax you think?

I believe 2.50%

Well it also depends if he is making a return on his money, and if he/she has box1 income as well, otherwise it might be more bennificial getting a normal mortgage and using the mortgage interest deduction in box1.

However OP asked how to avoid box3 and I gave him 2 options. I don't know if going that route might be the most optimal in the end because there are some many other factors but he asked specifically for box 3 avoidance.

 

[mikestachurski]

Thank you @WIE7 and @FantomOffshore for your answers / advices really much appreciated.

What about a solution in which I will gift my wealth to my father who lives in Poland
*there is no gift/inherit tax in Poland (0%)
*I have left NL last year so I am no NL tax resident (no gift tax)

After it I would come back to NL as a 'poor' man as on the paper I am not an owner of these assets.

Of course it delays the box 3 problem as at some point in the future my father will die and assets will come back to me / my son but at least I will avoid paying taxes for X amount of years.

Thoughts?

 

[johndunham]

I'm not sure about your statement regarding the 0% tax. If I google that, I find loads of information regarding taxes on gifts in Poland. The fact that one lives in Poland and the other in the Netherlands does not exempt you from these taxes. My Polish language skills are non-existent, but just take a look at the Inheritance and Gift Tax Act that came into power on the 28th of July 1983.

Edit: also, "I have left NL...so I am not NL tax resident", is a statement that might very well be false. Are you sure you are not obliged to pay taxes in the Netherlands?

 

[mikestachurski]

I'm not sure about your statement regarding the 0% tax. If I google that, I find loads of information regarding taxes on gifts in Poland. The fact that one lives in Poland and the other in the Netherlands does not exempt you from these taxes. My Polish language skills are non-existent, but just take a look at the Inheritance and Gift Tax Act that came into power on the 28th of July 1983.

Edit: also, "I have left NL...so I am not NL tax resident", is a statement that might very well be false. Are you sure you are not obliged to pay taxes in the Netherlands?

hi @johndunham it is 0% if it is given in the first line (father to son, husband to wife etc) it is confirmed. I am polish myself and have many friends etc. who have received gifts from their parents etc. and didn't have to pay tax on it.

 

[johndunham]

hi @johndunham it is 0% if it is given in the first line (father to son, husband to wife etc) it is confirmed. I am polish myself and have many friends etc. who have received gifts from their parents etc. and didn't have to pay tax on it.

Yes, but the other way around? That situation is not described in Dutch legislature for instance. So gift from son to father is taxed normally I think.

 

[mikestachurski]

No, as someone who has studied Dutch tax law (for some years, not finished) something like that will definitely be considered artificial by the Belastingdienst if they find out. Your best bet is to put about 1.2 million into a real estate company which you can then hand-over tax-free to your son by utilizing the BOR (Bijzondere bedrijfsopvolgingsregeling), keep in mind that you can only do this once you have died. Circa 1.1 million is tax free to hand over by gifting a company, after 1.1 million 83% is not-taxed so still a decent deal.

Right now the wealth taxes are still insanely low irregardless of your income, to be fair they are almost non-existent since The Netherlands does not have a capital-gains tax. But there are plans to drastically increase those for people who have more than half a million so keep that in mind. I personally don't think we will see it this decade since the VVD keeps being the biggest party.

@FantomOffshore I think they have been talking about changing it by 2025 but now with the court case won by someone I read somewhere they want to do it faster. If the fictional 4% rate they are using now will go away I agree the taxes will only going to go up as they will be based on 'actual' return.

Yes, but the other way around? That situation is not described in Dutch legislature for instance. So gift from son to father is taxed normally I think.

@johndunham I read somewhere would have to find it again that the EU law applies if my dad was resident of PL and I am NL resident PL law applies (so no gift tax) but once I have the assets back on my name box 3 of course applies.

 

[Mr Gus]

Thank you @WIE7 and @FantomOffshore for your answers / advices really much appreciated.

What about a solution in which I will gift my wealth to my father who lives in Poland
*there is no gift/inherit tax in Poland (0%)
*I have left NL last year so I am no NL tax resident (no gift tax)

After it I would come back to NL as a 'poor' man as on the paper I am not an owner of these assets.

Of course it delays the box 3 problem as at some point in the future my father will die and assets will come back to me / my son but at least I will avoid paying taxes for X amount of years.

Thoughts?

Why not just setup a dutch B.V. and stash the money there?

 

[mikestachurski]

Why not just setup a dutch B.V. and stash the money there?

The reason is that the 'wealth' is not cash which would work ok to keep it in BV but mix of stocks and crypto.

 

[Mr Gus]

The reason is that the 'wealth' is not cash which would work ok to keep it in BV but mix of stocks and crypto.

Then I don't see why on earth you would want to try to avoid paying a relative little amount of taxes on those huge gains you would have gotten by holding crypto and stocks the last few years. But maybe I am missing something..

 

[mikestachurski]

Then I don't see why on earth you would want to try to avoid paying a relative little amount of taxes on those huge gains you would have gotten by holding crypto and stocks the last few years. But maybe I am missing something..

no one like to pay taxes

 

[AMD]

if you can continue 30% ruling somehow it's very good option

how does this works?

Why not just setup a dutch B.V. and stash the money there?

you still would need to pay taxes??