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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

#61

Post by itake »

temp2441139 wrote: post #33
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 guess there would be all sorts of megacorps happy to loan you money for this with your assets as collateral. Remember London and Amsterdam have extremely strong finance industry lobbying, and that shows up in their lawmaking.

I know several people that got cleaned out in IPOs partially due to how taxes work on no-liquidity (lockout) periods. If you IPO'd at $10 ($3 goes to the tax man), and when you can finally sell it 6mo later and stock is only worth about $3, the IRS makes more money than you.

Checkout what happened at Uber [0].

My cousin at Aurora borrowed money for his tax bill on IPO. I don't know the final numbers, but I hope he at least broke even.

Real examples include: $GRAB, $AUR, $UBER

[0] - https://www.cnbc.com/2020/08/28/nearly-200-uber-employees-su...

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

#62

Post by blindriver »

This is extremely regressive and means that lower income people will be forced to shed their assets every year to avoid paying this unrealized gains tax. This means they will NEVER get the chance to accumulate generational wealth by holding onto stocks or other assets that have the capability of increasing tremendously like real estate.

It means they will need to sell their assets in order to pay this tax and only rich people will be able to afford holding onto assets long enough to become very rich.

It’s stupid, regressive and the Netherlands will learn a great lesson. The other thing that makes me laugh is that no other taxes are going down so this is a straight up tax hike on top of every other the Dutch pay.

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

#63

Post by ivankra »

mbesto wrote: post #47
ivankra wrote: post #29

Earlier quoted context omitted.

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 that (besides wealth/exit taxes), so maybe they're the world's first here! Real estate taxes. > not the yearly increase in wealth. Real estate taxes.

For real estate, yes, but it's a quite different type of asset with a stable value that (mostly) only goes up.

What about stocks or crypto (the assets this new law targets)? They can have wild value fluctuations in a year. If your crypto or startup's options have +1M paper gain this year and turn worthless the next year, is it fair to ask people to cough up some 300-500k of real cash in tax?

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

#64

Post by SilverElfin »

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…

> IMHO borrowing money against an asset should be realizing a gain and borrowing against foreign profits should be repatriating those profits.

Why is this necessary when the spending of the borrowed money is itself taxed?

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

#65

Post by dwightgunning »

lateforwork wrote: post #43
askmike wrote: post #31

To summarize the current Dutch personal income system: besides income from salary and income from own business (these are taxed quite high), income from investments (stocks, passive investments, real estate excluding your first home) is taxed quite low. The amount is simply a percentage based on the value (as per the start of the year) of your investments. So in the Dutch tax system there is no difference between rea…

That seems like a reasonable approach. That's much preferable to a tax on realized gains and a tax on unrealized gains. In the US when you buy a mutual fund you're already paying a "tax", for example, Fidelity eats 0.83% if you invest in their FSLVX mutual fund [1]. [1] https://fundresearch.fidelity.com/mutual-funds/summary/31612...

That's not a tax, that's the expense ratio, which is basically describing fees captured by the fund manager. Funds accessible to Dutch investors involve similar ERs. It's not an alternative.

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

#67

Post by alexanderchr »

appreciatorBus wrote: post #23
kingstnap wrote: post #12

Earlier quoted context omitted.

As I understand it most things like stocks with be under the capital growth scheme, taxed yearly, but they left a carve out for real-estate where it only is levied at sale/realization time.

Classic loophole. We tell ourselves this is to protect the little people who own homes, but the actual little people don’t have homes at all and rent. Meanwhile, anyone with money will get the picture invest all of it in real estate, once again enriching homeowner as well impoverishing the rest of us.

Home ownership is and would continue be taxed in box 1, so that’s not even superficially the reason for carving out real estate.

Box 3 on real estate only come in play for home 2+, and rental properties.

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

#68

Post by appreciatorBus »

icegreentea2 wrote: post #40
appreciatorBus wrote: post #23

Earlier quoted context omitted.

Classic loophole. We tell ourselves this is to protect the little people who own homes, but the actual little people don’t have homes at all and rent. Meanwhile, anyone with money will get the picture invest all of it in real estate, once again enriching homeowner as well impoverishing the rest of us.

It's true that it's a carve out, and current young generations are having huge problems getting homes in a lot of the world. But in the Netherlands, the overall home ownership rate is still about 70 percent ( https://ec.europa.eu/eurostat/databrowser/view/ilc_lvho02__c... might need to drill down a little). In the US it's 65 percent. Carve outs for home owners are some of the most understandable political strategies…

I totally get that it’s an understandable political strategy. I just think it’s in defensible as anything but a political strategy, and that it will ultimately make life worse for more people versus simply treating assets as assets, including homes. If homeowners do not wish their homes to be treated as assets, then they could simply forgo the right to profits, but I suspect they will not do that.

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

#69

Post by appreciatorBus »

bongodongobob wrote: post #30
appreciatorBus wrote: post #23

Earlier quoted context omitted.

Classic loophole. We tell ourselves this is to protect the little people who own homes, but the actual little people don’t have homes at all and rent. Meanwhile, anyone with money will get the picture invest all of it in real estate, once again enriching homeowner as well impoverishing the rest of us.

Only 29% of people in the Netherlands rent and that number is decreasing.

Yes, exactly, this policy will result in 29% of people who don’t own real subsidizing the 70% who do.

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

#70

Post by lateforwork »

dwightgunning wrote: post #65
lateforwork wrote: post #43

Earlier quoted context omitted.

That seems like a reasonable approach. That's much preferable to a tax on realized gains and a tax on unrealized gains. In the US when you buy a mutual fund you're already paying a "tax", for example, Fidelity eats 0.83% if you invest in their FSLVX mutual fund [1]. [1] https://fundresearch.fidelity.com/mutual-funds/summary/31612...

That's not a tax, that's the expense ratio, which is basically describing fees captured by the fund manager. Funds accessible to Dutch investors involve similar ERs. It's not an alternative.

Yes, the tax can be thought of an extra expense ratio. Same impact on you, at the end of the day.
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