As a small self-employed person, you have never built up a pension. Instead, you bought a second home in Amsterdam East a long time ago, at a time when it was still a problem neighborhood (‘Vogelaarwijk’).
The apartment has now risen considerably in price and has a WOZ value of 600 thousand euros. You rent it out for 2,000 euros per month. Now you have to pay more capital tax and in the long term even tax on the increase in the value of the home.
You find that unfair and are concerned about it. As you yourself say: ‘I am not a slum landlord who has some properties to relieve boredom with trips to the Caribbean islands. I lived on a strict financial diet for many years to pay for my pension: the mortgage and repayment of the retirement apartment.’
What is going on? At the end of 2021, the Supreme Court ruled that the Dutch way of taxing capital was incorrect. Everyone paid the same fixed percentage in wealth tax, regardless of the return. The percentage increased with higher power. As a result, savers paid too much tax.
Investors were better off, except in the years when stock prices fell. Investors in rental or holiday homes benefited the most, especially when house prices rose. Anyone who had such a home in box 3 received subsidies from others. Especially from savers.
The Supreme Court believes that the actual return should be taxed. The Tax Authorities can only achieve this in 2027. Until then, the wealth tax will continue to follow the fixed formula, with a lower rate for savings and bank deposits.
Next year, many wealthy people will pay more tax if they have shares or a home in box 3. When filing your tax return for 2021 and 2022, you could still choose which tax you paid: before or after the Supreme Court’s ruling. That choice is no longer available for the 2023 tax return. Then you will pay more.
Fortunately, that is temporary. If the actual return on your pension apartment is taxed from 2027, you will pay less per year. You can deduct the costs for the mortgage and maintenance from the rental income. If you sell the home, you also have to pay tax on the increase in value from January 1, 2027. The increase in value before that date does not count, because it is included in the fixed rate. Real estate investors will undoubtedly postpone maintenance as much as possible until they offset these costs with their tax return.
There will be a different tax from 2027 for holiday homes that are mainly for personal use. You then pay 3.5 percent on the WOZ value, regardless of costs, income and increase in value. The law is not yet final.
To get back to your question: yes, you are going backwards. But you receive a decent rent and have built up nice capital. To supplement your pension, you will have to sell the house at some point.