New Dutch tax targets crypto gains
A new Dutch tax regime that levies a 36% tax on unrealized cryptocurrency gains has sparked controversy. MP Michel Hoogeveen demonstrated that the levy on paper profits could wipe out up to 28% of an investor's portfolio, raising concerns the policy will drive crypto activity offshore and create severe liquidity risks for investors.
- The new tax system, known as the "Actual Return in Box 3 Act," is scheduled to take effect on January 1, 2028, and still requires approval from the Dutch Senate. - This legislation replaces a previous system where taxes were based on a "fictitious" or assumed rate of return on assets, a practice the Dutch Supreme Court ruled unconstitutional in 2021 for violating the European Convention on Human Rights. - Under the old "Box 3" system, the government assigned a deemed yield percentage to different asset classes, such as 6.04% for "other assets" like crypto in 2024, and then taxed that presumed return at a 36% rate. - The change was deemed necessary by lawmakers to avoid an estimated annual revenue loss of €2.3 billion after the previous tax framework was invalidated. - While liquid assets like crypto and stocks are taxed on unrealized gains, the new law applies a traditional capital gains tax (tax upon sale) to real estate and shares in qualifying startups. - MP Michel Hoogeveen, who publicized the potential 28% portfolio loss, is a member of the conservative JA21 party and previously served in the European Parliament. - Several political parties that voted for the bill have indicated it is a temporary measure, with intentions to eventually move toward a capital gains tax model where only realized profits are taxed. - Government officials, including the State Secretary for Finance, have acknowledged that a tax on realized gains would be preferable but argue that implementing such a system is not feasible before 2028.
