NETHERLANDS' TAX PROPOSAL SHOULD WORRY INVESTORS

The Netherlands is now proposing to abandon this principle. Starting in 2028, the Dutch government plans to levy a 36% tax on investment returns, including unrealized gains—the increase in the value of shares, bonds and other assets that investors still hold and have not sold.

- DHIRENDRA KUMAR

There is a simple principle that has underpinned sensible investment taxation almost everywhere: you pay tax when you actually make money—that is, when you sell an asset and pocket the proceeds.

The gain must be real, not merely a number on a screen, before the government arrives to take its share.

If you buy shares for €100 and they are worth €130 at the end of the year, you would owe tax on the €30 gain, even though that profit exists only on paper and could easily vanish the following year.

Policy shift

The Dutch government has a reason for this unusual step. Their Supreme Court struck down the earlier system, which taxed a notional return on investments regardless of what investors actually earned.

Strangely, the new system is intended as a correction toward taxing “actual” returns.

Good intentions, however, do not make the outcome less problematic.