How "Actual Return" Impacts Your Real Estate Investment

Are you an expat eyeing the vibrant Dutch property market? Navigating the financial landscape can be tricky. Especially with changes to how the Netherlands taxes your wealth. One crucial concept to understand is “actual return” (werkelijk rendement). This will significantly impact your real estate investment strategy from 2028 onwards.

Important note: This guide specifically addresses real estate investments that fall under Box 3 (savings and investments). Your primary residence, or “first house” (hoofdverblijf), remains in Box 1 and is not affected by these “actual return” changes.

ExpatEstate is here to guide you. We’ll demystify these changes, ensuring you make informed decisions.

Table of Contents

What is “Actual Return” in a Nutshell?

Currently, the Dutch tax system (Box 3) uses a fictional return on your assets. This often means you pay tax on an assumed profit, not what you actually earn. This has caused frustration, particularly for savers.

The new “Wet werkelijk rendement box 3” (Law on actual return Box 3), proposed to Parliament, changes this. From January 1, 2028, you’ll only pay tax on your actual return. This is the real income your wealth generates. The goal is fairness. Someone with a lower return pays less tax than someone with a higher return.

Direct vs. Indirect Return: What’s the Difference?

Your “actual return” is split into two parts:

Direct Return: This includes income like rent from your property, interest, and dividends. Crucially, necessary costs (like maintenance) are deductible.
Indirect Return: This is the change in value of your assets. For most investments, this “value growth” will be taxed annually (vermogensaanwasbelasting). However, for real estate and shares in startups, it’s different.

Real Estate and “Actual Return”: A Special Case

This is where it gets interesting for property investors. For real estate, your indirect return (the increase in property value) will generally be taxed only upon sale. This is called vermogenswinstbelasting (capital gains tax).

This approach prevents you from paying tax on an unrealized gain. It aims to encourage investment in real estate and startups.

Annual Taxation: What You Still Pay Annually

Even with capital gains tax on property, you’ll still pay tax annually on your direct return. This means your rental income, minus expenses.

The proposed law outlines two categories for rental income:

Category 1 (Intensive Rental): If you rent out your property for 90% or more of the year, you will pay tax on your actual rental income.
Category 2 (Less Intensive Rental): If you rent it out less, you will pay tax on the higher of your actual rental income OR a notional addition of 3.35% of the WOZ value.

Important: Necessary costs, like maintenance, are deductible in both cases!

Losing Money? “Actual Return” Has You Covered

What if your investment doesn’t go as planned? Under the “actual return” system, losses in Box 3 can be offset against future Box 3 income. There’s no time limit for this. You can carry forward losses indefinitely, provided they exceed €500 per year. This offers a significant safety net for investors.

Farewell to Tax-Free Allowance, Hello Tax-Free Result

The current “heffingsvrij vermogen” (tax-free allowance for wealth) disappears. Instead, the government introduces a “heffingsvrij resultaat” (tax-free result) of €1,800 per person per year. You won’t pay tax on this amount of your actual return. We expect the tax rate to remain at 36%.

Key Dates and Practicalities for Your Investment

Proposed Start Date: January 1, 2028. Parliament must pass the bill by March 15, 2026, for this to happen.
Initial Value for Real Estate: For existing Box 3 properties, the government will set an initial value. This value will be the WOZ value for 2029, with January 1, 2028, as the reference date. For rented properties, the “leegwaarderatio” might reduce this value.
Administration is Key: Since “actual return” relies on real figures, meticulous record-keeping of income, expenses, and property value changes will be more important than ever.

The Interim Period (2026-2027)

Before the “actual return” system fully kicks in, a transitional period exists. For tax years 2025 and 2026, you can choose between the current system (fictional return) or the “tegenbewijsregeling” (counter-evidence rule) based on actual return.

However, the “tegenbewijsregeling” for a second home, especially if not rented out, might be less favorable. It could involve a “value for own use” based on economic rental value (possibly a fictional 5.06% of the WOZ value), which has sparked debate.

ExpatEstate’s View: Prepare for the Future

The shift to “actual return” represents a significant change. While it aims for fairness, it also introduces complexity. For expats investing in Dutch real estate, understanding these nuances is vital.

The new system, while not perfect, offers advantages. You’ll pay tax when you actually realize a gain from your property sale. And you can deduct real costs. This could lead to a lower annual tax burden, making your Dutch investment more attractive.

Our advice? Start preparing now. Understand your current property’s value. Track all income and expenses meticulously. And consider professional advice to optimize your investment under the new rules.

ExpatEstate is your trusted partner for navigating Dutch real estate. Stay tuned for more insights and expert tips on maximizing your “actual return.”