Capital gain tax in the Netherlands - OrangeTax (2024)

• Arnold Waal
• 2 June 2021

Capital gain tax in the Netherlands, that is something often inquired about. Especially when property is sold in this current market. Sometimes also by a bitcoin holder that purchased and sold after the hype. Then the question relates more to setting of a capital loss.

Capital gain tax in the Netherlands

The quick answer is that we do not know the concept of capital gain tax. I would quickly like to put this remark in perspective in the below article.

Bottom line for private individuals is that we do not know the concept of capital gain tax. If you purchase and sell shares and you make a result. The profit is not taxed, the loss cannot be set off.

Capital gain tax and selling your property

Today it is June in 2021 and the Dutch housing market is rather overheated to say the least. To purchase a property, you feel like paying too much. Native Dutch have this feeling even stronger than internationals. The experts have a different view, they think the market can go up over the next decade even more. Are you paying too much if you can still make a gain when you sell?

More importantly, is the gain made with selling your property taxed?

The answer is no. However. There is a catch.

If you sold the property being your main residence with a gain. The gain is not taxed. If you purchase within 5 years after this sell again a property for you as main residence, you need to invest the profit in the new house. That is a condition.

The investment in the new house could be that you do not fully finance the house for the profit made with the previous house. However, we often see that the house is again fully financed. The profit is then used for refurbishments. Refurbishments only count in this respect if connect to the house. That is a new bathroom, kitchen, roof. Inventory and a Ferrari in the garage do not count as refurbishments.

What is the penalty for not reinvesting the gain?

In the situation you sold your main residence with a gain. You did not or not fully invest the gain in the next residence you purchased. What is the penalty. The penalty is that you cannot deduct the mortgage costs for the proportion of the gain.

Example. A EUR 50.000 gain was made with the sale of your property. You fully finance and not invest the profit in the next house. A new loan for EUR 300.000 is taken out. In this situation the mortgage costs (interest, notary costs ect) are for 250/300 part deductible for the period this mortgage is in place.

Is the penalty a problem?

Again, this is June 2021, the year in which it is possible to get a mortgage with a 10 year fixed interest for 1,4%. That interest rate over EUR 300.000 is EUR 4.200 per year. That interest rate over EUR 250.000 is EUR 3.500. This implies of the EUR 4.200 you pay to the bank, EUR 700 does not qualify for deduction.

In my previous article I stated that the maximum deduction in 2021 is 43%. This implies EUR 700 times 43% is EUR 301. So per month you lose EUR 25 in tax deduction. That is two happy meals, French frites and milkshakes. In other words, you hardly notice.

Capital gain and riding of into the sun – be carefull!

If you make a capital gain on selling property and you leave the Netherlands to start the next adventure. No capital gain tax….IN THE NETHERLANDS!

Other countries have learned about the gains made in the Netherlands and our system of no capital gain tax. Countries like the United Kingdom, Germany, South Africa, Canada, United States of America, Italy and I can only assume many more.

These countries have reread the article in their tax treaty with the Netherlands. Often that is article 6 of the tax treaty. Suddenly they read the word ‘may’. The ground rule is that the country in which the property is situated is the country that only taxes the property. Hence a capital gain is taxed in that country, only the Netherlands does not.

The other country in which you are a tax resident while selling the Dutch property will execute the ‘may’ as follows. We may tax the income of the property, so we will tax that part the Dutch do not tax. In other words, the entire capital gain.

So please do your timing well. If you are a resident in the Netherlands, try to remain one till and including the day you sold with a profit your property. Then the new to be tax residence of yours cannot tax the gain.

Tax is exciting

We think tax is exciting. You are excited about the capital gains not being taxed in the Netherlands, we can only assume. Capital gains are indeed not taxed, but if the gain is obtained with the sale of your home and you purchase a new home rules are in place that limit the free movement of the capital gain. Feel free to contact us about your capital gains.

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