Box 3 in flux: points of attention for property owners

This article previously appeared in Het Ondernemsbelang

For real estate owners, Box 3 is a calculation model that directly impacts return, financing, rental strategy, and timing of sale. For years, the complaint was uniform: those who held real estate privately were taxed as if the assets generated a fixed return, even if the actual cash flow was lower. That system has shifted legally and politically. The major reform is now no longer scheduled for 2027, but for January 1, 2028, provided the legislative process is fully completed. Precisely for this reason, 2027 will be a preparatory year.

The core of the new Box 3 is that actual return becomes the leading factor. For a significant amount of assets, a capital appreciation tax will soon apply as the general rule: annual income *and* increases in value will be included in the levy. For real estate, the legislative proposal adopts a different approach. The increase in value of real estate is not settled annually, but only upon realization, for example upon sale. Rental income, however, remains relevant on an annual basis. This difference is important for real estate investors. Real estate is simply less liquid than a stock portfolio. A paper increase in value cannot always be used to pay tax.

Points of attention

For existing real estate holdings, the value at the start of the new system will be decisive. In the explanatory memorandum to the legislative proposal, the WOZ value with a reference date of January 1, 2028, is used for residential properties. As a result, past value increases will, in principle, not be taxed retroactively. This sounds favorable for those who purchased years ago, but it actually makes the valuation at the pivotal moment more important. Anyone who does not have a clear record of WOZ assessments, rental contracts, maintenance costs, and financing charges in 2027 will start the new system at a disadvantage.

The first point of attention is therefore administrative: make real estate measurable. In the new system, it is no longer just about ownership, but about demonstrable return. Rent, vacancy, service charges, maintenance, management, interest, insurance, HOA contributions, and improvements must be clearly distinguished. Maintenance may receive different tax treatment than improvements. A roof repair is treated differently for tax purposes than adding an extra floor or making a property more sustainable, which structurally increases its value. Anyone attempting to reconstruct this only at the time of filing the tax return is playing catch-up.

The second point of attention is strategic: assess each property individually. A fully rented home, a holiday home for personal use, and a property with mixed use can have different tax implications. In real estate practice, return is often viewed at the portfolio level, but Box 3 will soon require even more detail. A property with modest rent but high maintenance costs may react differently from a tax perspective than a property with stable rent and low costs.

The third point of attention is liquidity. For the time being, current assessments will continue to use flat-rate percentages and a counter-evidence rule if the actual return is lower. The Tax and Customs Administration itself indicates that, until new legislation is introduced, a fictitious return is expected to be used as of 2028, unless the actual return is lower. For real estate owners, this means they must be able to substantiate two realities side by side: the current flat-rate levy and the future levy on actual cash flows and realized profits. This requires reserves. Not only for maintenance and interest rate adjustments, but also for tax corrections, objection procedures, and sales opportunities.

Next year

Anyone buying or selling in 2027 must account not only for transfer tax, financing, and rent regulation, but also for securities in the purchase agreement. The deposit is an additional point of attention in this regard. In real estate transactions, it is often agreed that the buyer deposits a security deposit, usually 10 percent of the purchase price, with the notary. If a transaction falls through, a dispute may arise regarding who is entitled to that amount, and in the event of a dispute, the notary is sometimes required to withhold the funds until the parties reach an agreement or the court rules. This directly impacts liquidity and timing. An investor wishing to restructure for tax purposes but facing contractual obstacles may have a plan on paper that is not feasible in practice.

For real estate owners, 2027 is primarily the year to prepare choices. Do not sell solely because a new system is approaching, but do assess whether the portfolio still aligns with the intended after-tax return. Refinance not only based on interest, but also on deductibility and cash flow. Capture costs even more precisely than before. Update rental files. Check whether private real estate still logically belongs in Box 3 or if a different structure is open for discussion. And involve a notary and tax advisor before contracts are signed, not only when the tax assessment or dispute has been filed.

Mr. Geert Janssen is a notary at MAES Notarissen