Netherlands: Supreme Court decisions in cases concerning “Box 3” (wealth tax)

The Dutch Supreme Court (Hoge Raad) on 20 May 2022 issued decisions in two cases related to “Box 3” (the wealth tax regime).

The first case involved a taxpayer that failed to file a notice of objection against the individual (personal) income tax assessments by the statutory deadline of six weeks. The lawsuit questioned whether these tax assessments should be reduced on an ex officio basis in view of a December 2021 Box 3 decision. In that decision, the Supreme Court decided, in short, that the Box 3 regime that has been in effect since 2017 goes against the European Convention on Human Rights and that restoration of rights is to be offered by taxing actually earned returns only.

The Supreme Court decided that the tax inspector will not have the obligation to grant ex officio reductions for individual income tax assessments against which no objection had been filed by the statutory deadline and the deadline for which had expired before the December 2021 decision. However, the Ministry of Finance may still decide to grant an ex officio reduction to non-litigants. That would be a political decision. In an April 2022 letter, the Deputy Minister of Finance said that this decision would be made after the decision had been delivered. Read TaxNewsFlash

The taxpayer had also asked the court whether, under the December 2021 decision, the taxpayer’s rights should be restored for the years prior to 2017 as well. The Supreme Court left no doubt in this matter: the December 2021 decision applies to 2017 and subsequent years only.

The second case involved a taxpayer that had filed a notice of objection against individual income tax assessments by the statutory deadline. The taxpayer’s objections were about the Box 3 tax liability. The tax inspector had divided these objections into an individual part and a class action part. The Supreme Court decided on the class action in the aforementioned December 2021 decision.

Further to this decision, the Deputy Minister of Finance issued a collective decision on the class action in February 2022. The tax assessments for the years 2017 through 2020 that were included in the class action are to be reduced within six months. These reductions will not be open to objection and appeal by taxpayers. Read TaxNewsFlash

The Supreme Court has now decided that, if a taxpayer disagrees with the reduction granted under the class action, there is an option to file a request for an ex officio reduction. Partial or full rejection of such a request will in fact be open to objection and appeal with a court.

Read a May 2022 report prepared by the KPMG member firm in the Netherlands