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Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

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Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#51

Post by Izikiel43 »

exabrial wrote: post #20

We dodged a huge bullet in the US with this. We already pay _excessive_ amounts of federal income tax for extreme inefficiency, the vast majority of it simply being funneled into the pockets of the ultra wealthy.

When you say excessive amounts of federal income tax, do you mean each tax payer, or the overall amount?

The top 10% of taxpayers contribute 72% of all income tax, so 90% of them aren't really contributing a lot, so per tax payer it's not a lot.

The overall amount is staggering, yes.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#52

Post by dang »

tschellenbach wrote: post #6

The title here mostly doesn't match the article right? Quote: "But unlike the capital growth tax, capital gains tax will, in principle, only be levied at the time of realisation. This is usually when the relevant asset is sold, but also when immovable property exits Box 3 for another reason, such as emigration."

Ok, we've put box 3 in the title above. Thanks!

(Submitted title was "Netherlands to start taxing unrealized capital gains yearly from 2028")

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#53

Post by blindriver »

anon291 wrote: post #17
jmyeet wrote: post #11

Good. IMHO unrealized gains and profit shifting are two of the biggest problems in modern taxation that need to be addressed. Many people will have heard about the Buy Borrow Die strategy by now. In case not, it's basically where you don't sell an asset (and thus have to pay taxes on the gain). You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than…

Unless you get to carry over unrealized capital losses , this taxation regime is highly regressive.

I would prefer they give a straight up tax refund as opposed to a credit you carry over.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#54

Post by varenc »

lordofgibbons wrote: post #18

How are situations like lack of liquidity to pay the taxes handled? i.e, As an employee you get stock options, which you exercise when you leave the startup. Then long before the company has a liquidity event the FMV shoots up because the business is doing well. How do you as a wage worker pay the taxes on your paper riches without a way to sell your shares?

Isn't this already a problem in many situations? If you exercise your options when you quit, pay only a very small strike price, but acquire private shares with a much larger fair market value, in the US at least you'd owe the IRS a lot of money but have no liquidity to pay it. Though this new tax would make that a yearly problem instead of just a problem when you exercise. (and mean that early exercise doesn't let you avoid it)

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#55

Post by bpodgursky »

nimih wrote: post #49
lordofgibbons wrote: post #18

How are situations like lack of liquidity to pay the taxes handled? i.e, As an employee you get stock options, which you exercise when you leave the startup. Then long before the company has a liquidity event the FMV shoots up because the business is doing well. How do you as a wage worker pay the taxes on your paper riches without a way to sell your shares?

I think in that case, you, the hypothetical wage worker, got hoodwinked pretty effectively by the beancounters when they were able to get away with compensating you in contracts that are apparently worthless to you.

Do you think about the things you say, or is it just reflex?

Everyone working for a startup knows it may be 5 years to a liquidity event. We're all big boys, we work on uncertainty and expectation. If the government changes the rules halfway through, it's pretty brain-damaged to blame the beancounters for hoodwinking the employees, and not using their magic oracular powers to predict how the laws would change under their feet.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#56

Post by itake »

ivankra wrote: post #29
tschellenbach wrote: post #6

The title here mostly doesn't match the article right? Quote: "But unlike the capital growth tax, capital gains tax will, in principle, only be levied at the time of realisation. This is usually when the relevant asset is sold, but also when immovable property exits Box 3 for another reason, such as emigration."

Looks like they're coining a new legal term "Capital Growth Tax", under which they are going to tax unrealized capital gains. I'm not aware of any other country that taxes them like that (besides wealth/exit taxes), so maybe they're the world's first here! Some countries have wealth taxes - but they are usually flat or scale with wealth, not the yearly increase in wealth. Note that currently NL does de facto have a w…

> I'm not aware of any other country that taxes them like

My home's property taxes operate this way. The county calculates the current value of my home and charges me a % of that in taxes every year.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#57

Post by energy123 »

kingstnap wrote: post #9

> The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings. Exchange results on bank balances in currencies other than EUR will also be taxed. Ouch. I suppose this is supposed to combat the trend of share buybacks over dividends. Gonna seriously suck to be anyone Norwegian and having…

Housing?

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#58

Post by abtinf »

tobyjsullivan wrote: post #28
kingstnap wrote: post #9

> The capital growth tax will apply to most assets, taxing both realised and unrealised returns, including appreciation in value and income from assets like shares, cryptocurrencies, and savings. Exchange results on bank balances in currencies other than EUR will also be taxed. Ouch. I suppose this is supposed to combat the trend of share buybacks over dividends. Gonna seriously suck to be anyone Norwegian and having…

Seems like it would also result in capital investors covering more year-to-year tax revenue, which could reduce some pressure on other tax payers. In theory, capital gains should average out over time. But in practice, I think an increasing amount of wealth is being held and not realized over many decades. It doesn’t help anyone that a few billion $ of gains will be taxed eventually if that is so far into the future…

Such a policy will collapse the markets almost immediately. Everyone who would have held onto their assets will suddenly have to sell to cover taxes. This will cause a spiral of fire sales.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#59

Post by notepad0x90 »

Why don't governments take a portion of the stock as tax payment? They can cash it in (or not), but if all your money is in stocks, are they forcing you to sell the stock to pay them? i.e.: The tax shouldn't be in numerated in currency but stock. If it is currency, you are forced to measure a portion of the stock based on its current value and sell that much stock, if they take a fixed percent of the stock that amount could be a lot or not so much depending on the value of the stock when they tax you. The amount of tax you pay shouldn't depend on how well the stock is doing at taxation time.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#60

Post by staticassertion »

jmyeet wrote: post #11

Good. IMHO unrealized gains and profit shifting are two of the biggest problems in modern taxation that need to be addressed. Many people will have heard about the Buy Borrow Die strategy by now. In case not, it's basically where you don't sell an asset (and thus have to pay taxes on the gain). You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than…

> You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than the interest rate.

Gosh, that hopefully is doing a lot for you sentence lol. Risk based economies function on that "hopefully". To phrase this another way, "if you borrow money against an asset, invest it in the economy, and make more than the interest in returns, you can avoid selling the asset to cover the loan", which sounds a whole lot more sane. It's a bit scary to imagine a world in which borrowing against an asset could not be profitable as that would mean that all investment in the economy would halt, no?

I'm not even against this tax fwiw but you're glossing over some major details in how that tax deferral works. The major issue is how cap gains is handled on death.

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