For Dutch residents, foreign real estate falls under box 3 of the personal income tax. The system was tightened on two points in 2025: new flat-rate returns and an important Supreme Court ruling on the calculation of actual returns.
Box 3 in 2025: flat-rate and actual returns
Since 2023, the Netherlands has calculated box 3 on the basis of a flat-rate return per category. For 2025, the percentages are:
- 1.44% for bank balances
- 5.88% for other assets (including real estate)
- 2.62% for debts
Since the Christmas Ruling (24 December 2021) and subsequent case law, taxpayers disadvantaged by the flat-rate system can invoke actual returns. The Tax Authority has had a separate form for this since 2024.
Supreme Court ruling 18 July 2025: foreign property treated separately
On 18 July 2025, the Supreme Court (Hoge Raad) ruled that returns from foreign real estate are not included in the calculation of actual returns in box 3 — to the extent that the Netherlands must grant relief from double taxation under the tax treaty. Concretely: rental income from a Spanish apartment does not count when determining whether the actual return is more favourable than the flat rate, because Spain has primary taxing rights.
For the flat-rate system, something different applies: the foreign property does count as an asset in box 3. The Netherlands then applies a reduction via the proportional exemption method, based on the share of foreign assets in total box 3 assets.
This dual principle means Dutch residents with substantial foreign real estate sometimes come out better than under the old rules — as analysis by TaxLive shows.
How is foreign property valued?
The Tax Authority uses the fair market value as of 1 January of the tax year. Rented property qualifies for a discount based on the vacant-value ratio. An appraisal report from a local, independent appraiser is in practice the leading reference.
Tax treaties — no double taxation
The Netherlands has tax treaties with virtually every European country. The principle: real estate is taxed in the country where it is located ("situs principle"). The Netherlands grants relief via the proportional exemption method.
Example: a Dutch resident with €500,000 in bank balances and €1,500,000 in foreign real estate (total box 3 base €2 million) gets 75% of the box 3 levy back via the object exemption. The net Dutch levy on the foreign portion thus disappears — Spain or Portugal levies its own via IRNR/IRPF.
Filing obligation in two countries
Foreign real estate creates a filing obligation in both countries. In the destination country there is usually a separate filing for rental income and/or wealth (in France: IFI; in Spain: IRNR; in Portugal: declaration via Modelo 3 for non-residents). The Dutch Tax Authority looks at the worldwide position.
Points to watch
Ownership structure. Property held through a foreign company (SCI in France, sociedad limitada in Spain) fundamentally changes the tax treatment — often unfavourably for Dutch residents. Consult an international tax advisor in advance.
Debts linked to the property. A mortgage on a second home counts as a debt in box 3, regardless of whether the mortgage is with a Dutch or foreign bank.
Currency differences. For property in Switzerland or the United Kingdom, currency variation matters. The value is converted to euros annually as of 1 January.
Inheritance. Foreign inheritance law differs significantly. France and Spain, for example, apply mandatory heir rules that override Dutch wills — unless the will explicitly chooses Dutch law under the European Succession Regulation.
This article is informational and does not constitute tax advice. The box 3 system has been subject to continuous case law since 2022; the rules described here reflect the position on the date of publication. Always consult a qualified tax advisor for your specific situation.
Sources: Belastingdienst — box 3 · Belastingdienst — tax treaties · Supreme Court ruling 18 July 2025 · TaxLive analysis · European Succession Regulation