Unrealized Gains Taxation in the Netherlands

How US Expats Are Taxed in the Netherlands (Box 1, Box 2, and Box 3 Explained)

There are so many online sources of advice suggesting the simplicity of moving to another country. Emphasizing the beauty, the lifestyle, the cost of living, of living in another country. The reality is it isn't that simple and ideally should be preempted by some serious financial planning long before you move. One area that deserves considerable investigation is how your overall income taxes may be affected by which country you establish residence in and how much you have in investment assets not just how much income you have.

You already know that as an American citizen or Green Card holder you pay taxes on your worldwide income regardless of where you live. In addition, you are likely to be considered a taxable resident in your new country if your circumstances warrant. These circumstances typically include living in the country for 6 months or more during the year and having your center of life (primary home, family, business, religious and social) predominant in the new country.

Simple enough. But in my experience the tax effect of moving overseas can vary dramatically based on not just your income but also on your assets. This is especially true in the Netherlands. In the Netherlands taxes are calculated based on 3 so-called boxes. Box 1 includes salaries, pensions and income from work. Box 2 includes income from business assets in which you have a substantial interest defined as owning 5% or more of a business. This would include dividends and capital gains on the sale of those assets. There are deductions allowed in Box 1 such as mortgage interest, alimony, and specific healthcare costs.

Then there is Box 3. The calculation for taxes under box 3 is currently under scrutiny and may change in the future but for now and particularly beginning in 2027 it can be a very expensive tax for those individuals or couples/partners who have substantial wealth. Let me explain!

What Is the Box 3 Wealth Tax? Current Rules for 2026

Box 3 is income tax on savings and investments. So those bank accounts, brokerage accounts, rental properties and the like are currently taxed in the Netherlands based on a fictitious return as high as 6% (2026) for investments like brokerage accounts and a lower rate of around 1.45% for savings and the result taxed at a 36% rate. Let's assume for example a taxpayer who has brokerage investments in the U.S. all of which are subject to the higher assumed rate. In 2026 there is a tax-free asset threshold of around 59,000 Euros per individual (118,000 Euros for a couple). As a couple (Netherlands has defined this as married or partnered) If you have $1,000,000 (approximately 1,165,000 Euros today) of box 3 net investment assets the tax payable would be 22,600 Euros (1,165,000-118,000) x .06 x.36)). A ruling in December 2021 found the fictitious returns violated property rights and non-discrimination principles under the European Convention on Human Rights. Therefore, during the 2026 tax year you can choose an actual return method – actual interest, dividends, rental income and realized gains. Taxpayers can choose whichever method is more favorable to reduce income taxes.

Since personal residence is not taxable in box 3 and retirement assets like 401(k) may be exempt the current tax on box 3 today isn't terrible and perhaps can be offset somewhat by the U.S. Federal Tax Credit. Do consult with a cross-border CPA to confirm that the treaty interpretation applies to your specific situation.

2027-2028 Box 3 Changes: What Unrealized Gains Tax Means for Americans

Here is where things get complicated for wealthy American expats. Under the new rules to take effect from 2027 a new system is in effect that would tax actual returns and unrealized capital gains at 36%! Unrealized gains are paper gains that show up on your statement. In the U.S. those paper gains aren't taxable until the assets are sold. Let's say that $1,000,000 net asset portfolio in your brokerage account in 2027 grows to $1,200,000 (a gain of $200,000). Under the new tax scheme those gains would be taxed at 36% along with the tax from your actual returns on dividends, interest and realized gains. The tax-free threshold is also changed so that if the Box 3 calculated tax owed is over 1,800 Euros, then a flat 36% tax rate is applied. Hypothetically let's say that $1,000,000 U.S. portfolio does earns 6% and you have $200,000 of unrealized gains from your U.S. brokerage account in 2027. Converted to Euros, you would now owe something near 97,160 Euros (1,165,000 (.06 x .36)) + (233,000 x .36). Now imagine you have a $3,000,000 portfolio of eligible assets that earn 20%. As the size of your non-exempt assets increases your taxes go up proportionately. The tax on unrealized capital gains is a major deterrent for wealthy people considering a move to The Netherlands.

Double Taxation Risk: How the US-Netherlands Tax Treaty Applies

If the proposed taxes on unrealized gains aren't bad enough, if you don't have the liquidity to pay the tax then it gets even worse. To begin with since the U.S. doesn't yet tax unrealized gains there might not be an offset to the Dutch tax in the U.S. Federal Tax Credit. Second, unless you have enough cash on hand to pay the tax you might be forced to sell assets to create the cash. This causes a potential capital gains tax under the U.S. system thus raising your U.S. taxes. Also, under the current rules in the Netherlands if you have a gain in your portfolio in 2027 that causes you to pay increased taxes you aren't allowed to go back and recover in 2028 if you incur losses in the same portfolio.

The tax laws that will take effect in 2027 have had many complaints lodged by businesses, individuals, attorneys and CPAs and that is causing the Dutch government to reconsider. Perhaps the Netherlands will employ a standard capital gains tax on realized gains like the U.S. in the future but until then, if you have a high net worth, excluding retirement plans be aware of your tax exposure in The Netherlands.

Tax Planning Strategies for Americans Moving to the Netherlands

For now, here is what I suggest for you:

If you can, avoid establishing tax residency in The Netherlands at least until the tax on unrealized gains is resolved.

If you must move to The Netherlands do pre-move tax planning well in advance with a qualified U.S./Netherlands CPA firm to try to mitigate your tax exposure. Qualified CPAs know how to manage the taxes via the three boxes.

If you are a high net worth or ultra-high net worth family, consider engaging a cross border financial planner to help you consider alternatives like somewhere else in the E.U. that would tax you more favorably.

In addition to planning for income taxes in The Netherlands also engage an attorney with cross border experience to review your estate plans between the two countries.

With the aid of a selection of qualified CPA, Attorney and Certified Financial Planner all with cross border experience you should carefully consider the effect of the move to a new country on your income taxes as well as reviewing your overall financial plans.

About the Author

^{Stewart Koesten, MSFS, ChFC®, CFP®, CIMA®, AEP®, Cert (IM), GFP Fellow is a Senior Wealth Advisor at Aspyre Wealth Partners specializing in cross-border financial planning for Americans moving abroad. He helps high-net-worth expats navigate complex international tax issues, including unrealized gains and wealth taxes.}