The Netherlands advances towards taxing unrealized gains from investments - a major change in the tax regime

The Netherlands is preparing to implement a significant tax reform that will radically change the way investments are taxed. The new approach, which comes in response to the court ruling that invalidated the previous system, imposes annual taxes on both realized and unrealized gains, regardless of whether investors have sold their assets or hold them on paper. This change will affect millions of Dutch people who, although they have investments in stocks, bonds, and cryptocurrencies.

Reforming Box 3: from assumed returns to actual taxation

The current Box 3 system operates based on assumed returns rather than actual market data. However, courts have determined that this system is neither fair nor legally sustainable. The Dutch Parliament, through the House of Representatives (Tweede Kamer), has recently reviewed the proposal in detail, with State Secretary for Taxation Eugène Heijnen responding to over 130 questions from legislators.

The government estimates that delaying implementation would cost approximately €2.3 billion (equivalent to $2.7 billion) annually. Due to pressures on public finances, other delays have been excluded from calculations. Although certain deficiencies in the proposed plan have been acknowledged, most legislators are inclined to support and vote for it.

Cryptocurrencies and other assets: unequal distribution of the tax burden

Under the new regime, cryptocurrency investors will face annual taxes on “paper” gains—that is, on the increase in the value of their assets, even if they haven’t sold. In contrast, real estate investors will benefit from a more favorable approach: they will be able to deduct costs and will only be taxed upon actual realization of profit. However, vacation homes used personally will incur an additional tax.

This difference in treatment raises questions about the fairness of the policy. Cryptocurrencies and other digital assets will bear a significantly higher tax burden than traditional real estate ownership.

The political coalition behind the reform

The vast majority of the Dutch political class supports the reforms. The People’s Party for Freedom and Democracy (VVD), the Christian Democratic Appeal (CDA), the new parties JA21 and the Farmer-Citizen Movement (BBB), along with the Party for Freedom (PVV), are expected to vote in favor of the bill. Left-wing parties, including Democrats 66 (D66) and the left coalitions (GroenLinks–PvdA), also support these changes, arguing that taxing unrealized gains is easier to administer and prevents budget deficits.

Risks of capital evasion and investor mobility

Critics warn that the new tax could substantially accelerate capital evasion from the country. Michaël van de Poppe, an influential cryptocurrency analyst in the Netherlands, labeled the plan as radical and hard to justify. According to him, the measure will exponentially increase the annual tax burden and will lead many residents to consider fiscal emigration.

“Nobody should be surprised that people choose to move out of the country, and rightly so, they should be able to do so,” he commented. Other critics have compared the taxation of wealth and unrealized gains to controversial historical moments, from the Boston Tea Party to the Reign of Terror, suggesting that this policy could generate strong social and economic resistance.

The rhetoric surrounding this tax reform illustrates the fundamental tension in the Netherlands: on one hand, the need to strengthen tax revenues and reform a system deemed unjust, and on the other, the risk of alienating investors and wealth producers from the country.