What If You Were Taxed On Gains You Haven't Made Yet? The New Dutch Law

One of our members asked about a new Dutch tax reform that's been quietly causing alarm among investors in the Netherlands.

In simple terms, it would move from taxing a fictional return on your wealth to taxing what you actually earn - and for many financial assets that includes the rising value of your investments each year, whether or not you've actually sold anything or received a penny.

Since the Dutch Supreme Court criticised the old Box 3 system in 2021, lawmakers have been working on a new approach. Their latest proposal is a system that is supposed to tax what people actually earn instead of a made‑up return. The catch is that, for many assets, “actual return” also includes gains that only exist on paper.

Even if you don't live in the Netherlands, the principle at the heart of it is worth understanding, because it touches on something that affects every investor: how governments decide to tax wealth.

Let’s break it down.

What The Netherlands Is Changing

In many countries, individual investors are primarily taxed when they realise gains (by selling) or receive income like dividends or interest. The Netherlands has taken a different approach, and its latest attempt to reform that system is what's causing the controversy.

For years, Dutch investors have been taxed not on what their investments actually earned, but on a fictional return set by the government, a fixed assumed percentage applied to their assets regardless of reality.

Dutch courts ruled this was unlawful, because people were being taxed on gains that, in many cases, simply didn't exist.

In response, the government has been designing a new Box 3 regime that aims to tax what investors actually earn instead. That sounds fairer, and in principle it is.

The problem is in the detail: under the new law, “actual return” is defined very broadly and, for most financial assets, includes the increase in value of your investments each year – even if you haven't sold anything and that gain only exists on paper.

On top of that, there isn’t just one simple rule. Most everyday investments like shares, bonds and crypto would be taxed each year on whatever they earned and however much they went up in value.

But some things, like certain rental properties and startup shares, would mainly be taxed when you actually sell them. Exactly which assets fall into which category is still being worked out and may change before the rules take effect.

So two people with the same amount of money could face very different tax bills, just because they own different types of assets.

The Unrealised Gains Problem

Under the proposed system, actual return includes unrealised gains, meaning the increase in value of your investments each year, even if you haven't sold anything.

Here's what that looks like in practice. Say your portfolio rises by €10,000 in a year. Under the new rules, you could owe around 36% tax on that gain, which is €3,600, even if you haven't sold a single share and that money exists only on paper.

This 36% rate is the figure currently attached to Box 3 in the political agreements, but it could still change before the system comes into force.

This creates what tax experts call a liquidity problem. Your investments might have grown, but you don't necessarily have the cash to pay the tax bill unless you sell something.

For investors in volatile assets, the situation gets more complicated: your portfolio could rise one year, triggering a tax bill, then fall the next. Draft rules include loss carry-forward and a small annual “tax‑free” return allowance, so you can offset future gains with previous losses, but the relief mainly comes as future credits rather than cash refunds.

In other words, the system gives you a cushion over time, but it doesn’t fully solve the cash‑flow problem of paying tax on gains that may later disappear.

Some assets, including certain real estate and startup shares, may also be treated differently under the proposal. The details are still being refined.

For now, the political debate in The Hague is focused on exactly these details: which assets should be taxed on annual paper gains, which only at sale, and how to make the system workable for ordinary savers rather than just tax experts.

What This Could Mean For Dutch Investors

Because the broad outline of the law is politically agreed but the detailed legislation is still being debated and must still go through the full parliamentary process, Dutch investors are dealing with a double uncertainty: how big their future tax bills might be, and whether the rules will change again before they ever apply. There is also ongoing discussion about whether the system should move closer to a more conventional capital‑gains tax.

And beyond the immediate tax burden, the proposal raises questions about behaviour.

When holding assets becomes more expensive simply because their value rises, some investors may feel pressure to hold more cash or lower-volatility assets to avoid large unpredictable tax bills.

Others may look at restructuring how they hold investments, or reconsider where they're based altogether.

If you pay tax in the Netherlands, speaking to a qualified tax adviser about your personal situation is the right step.

Could Other Countries Follow?

In many countries, investment gains are primarily taxed when you sell.

The idea of taxing annual unrealised gains on listed investments for individual investors is still relatively rare, and for good reason. It's administratively complex, politically difficult, and as the Dutch case shows, genuinely hard to design fairly.

The Netherlands will be watched closely as a test case. But the fact that it's happening there doesn't mean it's about to become a European norm.

What it does do is raise a question worth keeping in the back of your mind: how does the country where you pay tax currently treat investment returns, and how might that change?

That's not a reason to panic or restructure everything. It's just a reminder that tax policy is part of the investing environment, and staying broadly aware of it is part of being an informed investor.