Dutch Parliament has adopted legislation proposed by its predecessors, putting a new ‘Box 3’ [income from savings and investments] tax system in place as per 2028. The new law shifts how we calculate such income from a deemed returns system to an actual returns system , and calculates the actual returns on an accrual rather than gains basis and imposes tax at a 36% rate. Despite thorough consideration, the scaleup and venture scene thinks the Government is getting it wrong, as does the internet.
In this post, we separate fact from fiction and framework from meme, explain how the Netherlands could decide on this, give a primer on the systematics as they currently stand, and outline what’s expected next. And we digest the implications for the scale‑up and venture space, which seems most affected in the current state of affairs despite a targeted exemption.n. But we’ll get to that.
Rather Watch than Read? Here’s our Box 3 Reform Webinar Replay:
On Thursday, February 19th 2026 [date stamp may be relevant when later changes are made to the legislation], we hosted our Webinar “36% Tax on Unrealized Gains? A ‘Box 3’ Update for Scaleups and their Teams and Cap Tables”. Here’s the replay:
If you’d like to download or follow along with the slide deck, you can find it here:
A Brief History and Overview of ‘Box 3’, as it Stands and Reform.
First of all: What is ‘Box 3’?
We’re talking about Dutch Personal Income Tax. This law covers [1] Dutch residents’ global income and [2] foreign residents’ Dutch income (with taxing rights potentially limited by Treaties and Directives in order to avoid double taxation). The Tax Code taxes all income derived from any predefined “source of income,” and under this analytical structure, such sources are categorized into three separate “Boxes,” each comprising a different framework for determining the income balance and applying specific rates.
Dutch people grow up with this ‘mindmap’ of their Tax Code so it makes sense, but for non-Dutchies, we use a visual for some better clarity:
What’s in Box 3 and What was the Base Idea?
Box 3 covers income derived from the ‘sources’ [1] savings, [2] investments and [3] -negatively- associated debts and financing. Think of elements like savings and checking accounts or cash, but also stock portfolios, government bonds, art collections or -notably in this blog- startup, SME or otherwise off-market investments, debt or equity (assets, basically).
The current Personal Income Tax act, or at least the primary framework of it [as you’d expect, it underwent many iterations and alterations since then], was adopted in 2001. Keeping in mind the state of tech and exchange of information at the time, the Dutch legislator figured that it would be much less burdensome to ask taxpayers to report a deemed return.This would keep the administrative burden lower, and an added benefit would be that the flat rate incentivized people to generate greater returns (thereby lowering their effective tax rate) and “keep their money rolling” rather than sitting idle. A 4% rate was agreed on. And despite this system always having some winners and some losers, government bonds performed at roughly 6%, so feasible alternatives were readily available, and very few people considered this new law “systemically unfair”:
Then what Happened?
As time progressed, we entered our current timeline and events like [1] the global financial crisis of 2008 and [2] the global pandemic occurred, and a policy response was quantitative easing, which led to a massive availability of cash with lower interest rates (and lower average returns on savings) and soaring equity values (and higher average returns on investments).
This led to certain savings‑heavy taxpayers taking their tax assessments to court, arguing that the deemed‑returns system had lost its fairness as it started straying too far from reality, leading to people with certain investment profiles being “overtaxed” in that they not only consistently paid tax on greater returns than they made, but often had to pay more tax than they made in returns to begin with. As a result, they had to hand over all their harvest, and even some of their seed. And because ‘Box 3’ is still an *income* tax and not an asset or wealth tax, the Supreme Court started ruling that Box 3 had problematic effects in individual cases but not (yet) on a systemic level, and that it was up to the legislator and not the court to address this.
With the interest rate on savings dropping to 0% [or barely above that] for many years, the Supreme Court fired multiple warning shots that the 4% deemed return was consistently higher than what Box 3‑ers could reasonably attain through a “reasonable risk pattern.” And when the legislator remained slow to take action and address, the Supreme Court ultimately lost patience and issued its notorious Christmas Ruling of 2024 in which Box 3 was ruled incompatible *on a systemic level* with EU Law, and more specifically the EU guaranteed right of ownership:
“[…] the Supreme Court holds that, even allowing for the wide margin of appreciation afforded to the legislature, it cannot reasonably be said that the deemed‑return system in force since 2017 satisfies the proportionality test arising from Article 1 of the First Protocol. There is no reasonable relationship between the interests the legislature sought to advance with that system and the inequality created by the design the legislature chose to achieve that aim.
In particular, the -in itself understandable- desire to promote administrability and to maintain tax revenues cannot provide sufficient justification for the considerable difference in treatment between those who reap positive returns from their risk‑bearing investments, and who thereby also receive a fiscally privileged position, and those who have not enjoyed such fortune and who, under the system, are assigned a relatively heavy tax burden. The fact that the notional return in the two return categories can be revised periodically does not alter this.
From the foregoing it follows that no adequate justification can be identified for the notional‑return system applicable as of 2017. For a taxpayer who, like the interested party in the years at issue, is confronted under this deemed‑return system with an assessment on income from savings and investments that exceeds the actual return achieved, this results in a violation of the rights guaranteed to him by Article 1 of the First Protocol, read in conjunction with Article 14 of the European Convention on Human Rights.”
The ‘legal speak’ above may be somewhat cryptic, but the result was that the ‘overtaxed’ (i.e.: those who were taxed for greater returns than they actually made) had to be given the opportunity to evidence their defitic and get refunded, while those making greater returns still fell under the -de facto- capped tax that the deemed return system imposed. With the ‘winners’ not paying more but the ‘losers’ getting refunds, a budget deficit arose. In response, the legislator launched a series of patchwork fixes that provided some legal breathing room, rather than an actual solution to the problem. So while we currently still work with a “three categories of deemed returns” system, political consensus was reached that we need a new system. And given fairness and tech capabilities today, an actual returns based system it would be.
What does the New Box 3 System look like (for now)?
As stated, it was clear early on that the time was ripe for Box 3 to move toward a Real Returns-based system. And the first question that arises, is what ‘Real Returns’ are; does this comprise only liquid gains, or does include paper gains? In other words: would this be a good ol’ Capital Gains Tax, or a Capital Accrual Tax? Well, long story short, the accepted legislation (“Box 3 on real returns act“) takes the latter as a base framework.
The basic characteristics:
- Same assets encompassed as was previously the case;
- Capital Accrual Tax on an ‘Actual Returns’ basis;
- Annual, year-end calculation of Returns;
- Loss carry-forward but no carry-back (i.e.: high-water-mark system);
- Deferral to a Capital Gains Tax for for non-current assets:
- Equities in ‘Startup Companies’, and;
- Investment Real Estate and Second Homes (with a deemed 3,35% return on the assessed property value for non or non-fully rented out properties).
- 36% Tax Rate on the balance.
The Startup Exemption
It was flagged early on in the legislative process that the Capital Accrual nature of such a system -if it need be so at all- would match poorly with low-yield and non-current or trading but volatile assets like startup shares. And given the strategic Dutch policy goal of being a consistent Top 5 ranking startup nation as a testament to the general innovation and business climate, it would seem inconsistent to discourage <5% equity ownership in such companies as this would logically botlleneck access to financing (domestic angels) and talent (incentivized staff).
On behalf of the Dutch tech sector’s platform Techleap, we wrote a policy document highlighting the misalignment and suitable alternatives.
In short, we argued that investments in and ownership of startup equities facilitate a dynamic and innovative economy, and suffer from natural under-investment which should be alleviated rather than exarcebated through taxation. And due to the illiquid but volatile nature of such equities, a Capital Accrual / Unrealized Gains Tax would further diminish the attractiveness of these already uncertain assets, which would be against policy goals and, put briefly, a bad idea in all accounts. Instead, a Capital Gains Tax would mitigate liquidity risks and provide a stable framework in which equity owners are not incentivized to push for cash yield for tax reasons, allowing companies to better invest in R&D:
Ultimately, the Box 3 legislation that was passed through parliament did contain a startup exemption or rather deferral rule, but it covers mainly early stage startups due to the stated definition – which also has cliff effects:
Article 5.17. Start‑Up Company
For the purposes of this Chapter and the provisions based thereon, a start‑up company is defined as a corporation:
a. that was incorporated no more than five years ago;
b. that carries on only a business (or businesses) which commenced no more than five years ago;
c. whose annual turnover does not exceed €30 million;
d. whose shares or profit‑sharing certificates are not traded on a regulated market; and
e. whose shares or profit‑sharing certificates are not held—whether as a matter of law or in fact, directly or indirectly—for more than 25% by a legal entity:
1°. whose shares or profit‑sharing certificates are traded on a regulated market; or
2°. whose annual turnover exceeds €30 million.
Reception and Criticism of the New Box 3 Legislation
Regardless of the caveat for startups, the acceptance of an Unrealized Gains Tax whole triggered quite the media storm. International press and ‘the internet’ were both amused and shocked at the decision, which is a world-unique decision after all:
Despite international backlash -and decisions the world over to *not* go for Capital Accrual Taxes-, the decision was not in fact rash, but rather carefully considered. And scholars continue to defend the principle. A brief overview of the arguments:
Commentary in The Dutch Financial Times (Van den Dool, Gerritsen and Jacobs) argues that a capital‑accrual tax remains ‘economically superior’ to a traditional capital‑gains tax, chiefly because it prevents deferral strategies, limits arbitrage opportunities, and promises more stable revenue, treating savers and investors alike under a unified framework.
Yet, I would argue (and equally do so in The Dutch Financial Times) this supposed neutrality rests on a false equivalence: Box 3 contains both highly liquid yield‑producing assets and illiquid, volatile growth assets, and taxing unrealised gains does not affect them in the same way. Analyses of the forthcoming “Real Returns” system already acknowledge that annual taxation of unrealised increases can create serious liquidity issues, forcing investors to sell assets merely to fund their tax bills. An that’s issue especially acute for private equity, family firms and start‑ups.
While a capital‑gains tax undeniably risks lock‑in and delayed realisation, it avoids these liquidity pressures and better supports long‑term, innovation‑driven investment. Hence the legislature’s own decision to exempt certain illiquid assets from accrual taxation and subject them instead to realisation‑based rules. In practice, then, the choice is not between a “neutral” tax and a “distortive” one, but between a system that forces premature consumption of capital and one that preserves the economic space for entrepreneurship and growth.
Nonetheless, taxes aren’t just about academic perfection but also a behavorial science and, importantly, revenue. Under a Capital Gains Tax, the taxes come later (although in many scenarios, total tax raised is greater) and this ‘earn-in period’ would need budgettary coverage. And it remains a tough sell to raise, for instance, sales tax on groceries to find it. Perhaps that’s why the legislator was easily convinced of pro-Capital Accrual Tax arguments..
So What’s Next?
The legislation was adopted, but seemingly more as a back stop to the budget gap than as a convincing and lasting new framework. A motion was passed to switch the system entirely into a Capital Gains Tax, discussion has been fierce, and the new Minister of Finance has since stated that they *will not* submit the legislation to the Senate after it had already passed the House, and that they should go back to the drawing board.
In the meantime also, work on the Startup-definition continues, and the definition that’s being worked with for the new and improved Startup ESOP-act will be leading as far as the Minister is concerned.
That new definition is broader:
Under the new definition, a company qualifies as a start‑up or scale‑up if the following four cumulative conditions are met:
1.The company is innovative and its business activities are scalable.
2.The company can demonstrate, through a growth plan, the steps required to realisethis scalable activity and growth.
3.The company is operated as a private limited company (beslotenvennootschap), a public limited company (naamlozevennootschap), or a comparable European legal form.
4.The company is not in suspension of payments or insolvency and has appropriate solvency and liquidity for an innovative company with scalable business activities.
In order to obtain said status, The company submits an application to the Netherlands Enterprise Agency (RVO) and provides the required documentation. Upon a positive assessment, the RVO issues a certificate (beschikking) to the company. The company informs its shareholders of this decision. The shareholders (natural persons) report their shares in the start‑up under the capital gains tax regime in Box 3 in their personal income tax return. The RVO certificate for start‑ups is initially valid for a period of eight years, after which it may be extended in five‑year increments following reassessment.
This ‘hook’ is expected to open a bouquet of additional future startup-related tax measures, as whether it may look like it or not: the Dutch government is actively pursuing a better startup and venture climate. And if you want to follow these developments, I invite you to follow me on Linkedin!
