The Dutch House of Representatives has passed legislation that establishes a new social contract between the government and private investors with this groundbreaking law for the taxation of “Unrealised” capital gains. This law is expected to come into effect after 2027 or 2028 and will place a 36% flat tax (levy) on the increase in value of certain types of property (i.e., cryptocurrency and shares) without regard to whether the investor has sold the property to actually realise their gain.
This new law is a radical departure from most developed nations’ practices of taxing “Realised Gains” and will replace the recent striking down of the previously used “Box 3” taxation system by the country’s Supreme Court. While the government asserts that modernizing the tax code is necessary to keep up with changing financial markets, fiscal experts and the opposition parties contend that this proposal represents a credible threat to the financial well-being of private investors in the Netherlands.
A Radical Shift: Taxing Money You Don’t Have
The Dutch tax authority has implemented a new taxation method called ‘capital accretion tax’ (vermogensaanwasbelasting) which requires that taxpayers with investments classified as liquid assets (Bitcoin, Ethereum, etc.) to have their portfolios evaluated annually. When there is an increase in value of your investments from January 1st through December 31st, the increase is classified as taxable income that is subject to taxation at a rate of 36%. An example would be if an individual purchased €10,000 worth of Bitcoin in January and it had increased in value to €15,000 by December, then there would be €5,000 worth of taxable gain, or €1,800 owed in taxes, even though the investor had not yet sold the Bitcoin. As a result, long-term holders will face a liquidity crisis, as they may need to sell some of their investment to pay taxes to the Dutch Government, thereby compounding their losses and erasing any potential compound interest earned.
The Inflation Trap
According to many economists, the most serious shortcoming with the bill is that it does not consider inflation. As a result, when an asset increases in value (i.e., appreciates), the owner is actually being taxed on this increase even though in real terms (due to inflation) the owner did not gain anything. For example, when the inflation rate is 5% and the asset appreciates by 5%, the owner has lost purchasing power since he now has the same purchasing power with his original investment. But under the Dutch model referred to in this bill, the owner would be taxed 36% of the nominal amount he gained, which acts as a wealth siphon for the Government to drain the real value of savings over a longer period of time. In addition, many economists feel that this type of taxation is double jeopardy against citizens; when the price of goods rises because of increased GOVERNMENT spending and inflation, citizens are then paying taxes on the increase in value of their assets, which is no increase in value in the real economy.
A System “Ripe for Abuse” and Workarounds
While the law targets liquid assets like crypto and stocks, it carves out exceptions for illiquid assets such as real estate and shares in startups, which will likely remain taxed on a “realized” basis. This discrepancy is expected to drive behavior rather than revenue.
“We will likely see a massive shift into real estate or complex corporate structures designed to shield assets from annual valuation,” notes Pieter van der Meer, a tax strategist based in Rotterdam. “Wealthy investors can afford to set up BV (limited liability) companies to defer these taxes, effectively capping their rate or postponing it indefinitely. It is the small retail investor—the person saving for retirement via an ETF or a crypto wallet—who lacks the resources to navigate these loopholes and will bear the full brunt of the 36% rate.”
Capital Flight Risk
The geopolitical implications are stark. The Netherlands has always been internationally recognized due to its innovative finance sector and many productive people.
However, the Netherlands may lose out on the best, most mobile, and most productive people in the world. With neighboring EU countries like Belgium and Germany offering significantly more favorable tax environments for capital gains (often 0% for long-term holds), the incentive to emigrate is powerful.
“This is a gift to our neighbors,” said a representative from a Dutch shareholder advocacy group. “You cannot build a fence around digital capital. If you punish risk-taking and long-term holding with a 36% annual fee on paper profits, that capital will simply move to where it is treated fairly.”
Bureaucratic Nightmare and Refunds
The administrative burden of the new system also raises serious questions. If an investor pays taxes on unrealized gains in Year 1, but the asset crashes in Year 2, the government theoretically owes the taxpayer a refund or a tax credit.
However, the mechanism for these “loss carry-backs” is complex and historically sluggish. Investors worry they will be trapped in a cycle of paying taxes on volatile upswings while waiting years for relief during downturns—effectively giving the government an interest-free loan while assuming all the market risk themselves.
What Happens Next?
The House of Representatives approved the bill, but the Senate needs to concur with that vote before passing it into law. The present political momentum of reforming the former outdated legislation which requires an overhaul to comply with federal law is at the moment supporting the reform, however, there is an increasing amount of opposition to the proposed change. Legal challenges are already being prepared, arguing that taxing income that hasn’t been realized violates property rights principles.
For now, Dutch investors are left in a state of uncertainty, watching as their government attempts a fiscal experiment that many hope will serve as a cautionary tale rather than a blueprint for Europe.
