Brussels Plan Could "Turn Dutch Box 3 Upside Down"
A draft EU plan to exempt all share holdings between European companies from dividend tax could push wealthy Dutch investors out of Box 3 and into a BV, tax experts warn.
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A draft EU proposal to do away with dividend tax between European companies could pull the rug out from under the Dutch government’s planned reform of its wealth tax, Box 3, tax experts have warned. The proposal, first reported in De Telegraaf, would make investing through a private limited company (besloten vennootschap, or BV) considerably more attractive than holding shares privately. Tax academics say it could leave a hole of billions of euros in the Dutch treasury.
The Dutch box system
Dutch income tax sorts income into three “boxes.” Box 1 covers income from work and from your own home. Box 2 covers income from a “substantial interest” in a company, typically when someone owns at least 5 percent of a BV, the Dutch private limited company. Box 3 covers wealth held by private individuals: savings, investments and second homes.
For most ordinary savers, Box 3 is the relevant box. In 2026, the first €59,357 of wealth per person is tax-free, and anything above that is taxed at 36 percent on an assumed (fictitious) return. Investors with a substantial interest in a BV are instead taxed in Box 2, with the company paying corporate income tax on its profits and the owner paying around 31 percent on the dividend they pay themselves.
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What is changing in Box 3 in 2028
From 1 January 2028, the Netherlands is set to introduce a new Box 3 regime, the Wet werkelijk rendement box 3. Instead of being taxed on an assumed return, private investors will be taxed on their actual return at 36 percent. Crucially, that “actual return” is intended to include “paper gains”: increases in the value of shares and other investments, even if the owner has not sold. State secretary for finance Eelco Heinen has confirmed in a letter to the Senate that the cabinet sticks to its 1 January 2028 start, and has explicitly rejected an alternative withholding tax model based on the German system.
The reform is controversial in its own right. Investor associations and tax specialists warn that taxing unrealised gains can force people to sell shares (or borrow) simply to pay the tax bill, and that even cautious savers may end up with a higher annual tax bill than under the previous, simpler system.
The Brussels twist
According to a draft proposal from EU tax commissioner Wopke Hoekstra, the European Commission wants to encourage cross-border investment by, from 2028, ending dividend tax between European companies in almost all cases. At the moment, EU rules allow companies to receive dividends tax-free from another company only if they hold at least 10 percent of the shares; under the new plan, that threshold would disappear and the exemption would apply to all corporate share holdings, regardless of size.
Brussels’ aim is to deepen Europe’s capital market and reduce barriers to investment between member states. Max Velthoven, a tax expert at EY, told De Telegraaf that the current rules are “a brake” on cross-border investment: “If, say, it is difficult for me to invest in Italy, that holds back investment within the EU.”
Why the proposal “turns Box 3 upside down”
For Dutch private investors, the combination of Brussels’ plan and the new Box 3 system could be transformative, tax experts say. If dividends between European companies become essentially tax-free, an investor with a BV could buy shares through their company, receive dividends tax-free at the company level, and only pay the 31 percent Box 2 rate when they actually pay themselves a dividend. Compared with a Box 3 tax of 36 percent every year on actual and paper gains, that becomes substantially more attractive.
Jan van de Streek, professor of fiscal law, calls the European direction “really very radical” and warns that it “turns the entire system upside down.” Erasmus University tax economist Peter Kavelaars says he sees “a pull towards Box 2” already, and that the EU plan would only reinforce it. The risk for the Dutch treasury is twofold: less direct revenue from Box 3, and a possible new round of fiscal “constructions” in which investment gains are reshaped as dividend income from a BV.
A long way from law
The proposal is, for now, a draft. EU tax measures need the unanimous backing of all 27 member states to pass, and many capitals are nervously eyeing their own budgets in a period of high deficits and rising debt. Hoekstra’s idea would mean less national tax revenue almost everywhere, which is itself a major hurdle. Even within the European context, the proposal fits a wider EU effort to make the bloc more attractive to investment and prevent capital from flowing to the United States.
For most people in the Netherlands, nothing changes in the short term. The existing Box 3 transitional law applies until the new “actual return” system kicks in. For wealthier investors with substantial portfolios, however, the question of whether to set up a BV will start to bear down more sharply over the coming years. Setting up a BV also brings its own administrative costs, accounting obligations and exit taxes, so the choice is rarely as simple as a pure tax comparison.
What is clear is that the new Box 3 system is coming under pressure from several directions at once. As Van de Streek put it in De Telegraaf, the Brussels plan could leave it standing “on its head” before it has even properly started.