What does the ruling of the Supreme Court mean?

The Supreme Court of the Netherlands ruled on 24 December 2021 that the investment yield tax system (box 3) in effect since 2017 violates the European Convention on Human Rights (ECHR). In fact, what is the investment yield tax system? And what does the Supreme Court ruling mean exactly?

The investment yield tax system

We charge tax on income in box 3. The income is calculated on the assumption that part of the assets are saved and part invested. This combination of savings and investments is called the asset mix. For both parts of the asset mix, the return was legally determined. We did not take into account the actual return. The actual composition of the asset mix was also disregarded. Therefore, this is also called notional or fictitious return (or yield).

Ruling of the Supreme Court

Tax payers started proceedings on the investment yield tax system based on fictitious returns. They felt it was unfair that they had to pay tax on returns that they did not achieve. The Supreme Court agreed with them.

Read more about the 2017 and 2018 ruling on the investment yield tax on the Supreme Court's website (only available in Dutch).

Objections 2017 to 2020 upheld

Following the Supreme Court ruling, the Tax Administration has upheld all objections in the box 3 mass objection proceedings for the years 2017 to 2020. Read more about it in the Staatscourant (Dutch Government Gazette, only available in Dutch).

New calculation method for box 3 income

The Supreme Court Ruling led to a new method for calculating the box 3 income.