Have you ever dreamed of a charming cottage in the Netherlands or a superb flat in Belgium? If so, it does not matter whether you are a seasoned property investor or just curious. Buying a property in another country can be an exciting adventure.
We would therefore like to briefly outline below the main insights and tax implications regarding the double taxation treaty between Belgium and the Netherlands. We’ll take a closer look at the tax implications for a Belgian who owns real estate in the Netherlands and vice versa. Although there have been no recent changes to the law on property income, it is still worthwhile highlighting the key points again.
In this article, we’ll focus only on immovable property, also called "real estate", held by a private person as a second home when the property is used only as a holiday home. This means that we will not discuss homes that are used as a primary residence (“own home”) or that are rented out.
Taxation in the Netherlands
Domestic taxpayers owe tax in the Netherlands on worldwide income. By contrast, as a non-resident of the Netherlands, you only pay income tax in the Netherlands on the income you obtain from the Netherlands (foreign taxpayer). As soon as you become the owner of a holiday home in the Netherlands, you are therefore a foreign taxpayer and you have to file an annual income tax return in the Netherlands for your Dutch income.
Taxation on owning a Dutch holiday home
As a holiday home owner in the Netherlands, you have to deal with Dutch national taxes and local levies. Local taxes are levied on the owner and/or user of the property, including waste collection charges, sewerage charges and property taxes. They often total several hundred euros a year.
Besides local taxes, you have to deal with income tax.
Dutch income tax: boxes 1, 2 and 3.
As a property owner, you also owe income tax in the Netherlands, even if you are the only one using the holiday home. We’ll first briefly explain the Dutch income tax system.
Boxes system
Dutch income tax has a “boxes system”:
- Box 1 is income from work and home (primary residence),
- Box 2 is income from substantial interest,
- Box 3 is income from savings and investments.
Each box has its own tax base and tax rate. A second home for own use is taxed in box 3.
Note: The box 3 system is rapidly evolving. Following recent case law, the Dutch government is developing a new system in which taxation is based on the actual return on assets in box 3. This system will not come into force before 2028. Until then, there are two options in box 3: (1) taxation based on notional returns on assets and liabilities in box 3 or (2) taxation based on an “adjusted actual return” if this is lower than the notional return. The taxpayer may invoke this ‘adjusted actual return’ by using the so-called OWR form (Declaration of Actual Return).
Current box 3 system
A box 3 system based on notional returns applies in 2025. The notional returns in 2025 are as follows:
- Savings: 1.44%
- Other assets (real estate, as well as receivables and securities): 5.88%
- Debts: 2.62%.
The (notional) box 3 income is taxed at 36% income tax (2025). The tax due is determined based on the assets and debts on the reference date, which is January 1 of the relevant tax year. For residential properties, 1 January of the previous year is used as the reference date. Changes in box 3 assets during the year are in principle irrelevant for taxation in that year.
Other key elements of this box 3 system are as follows:
- Annual levy;
- Threshold for debt deduction: €3,800 for individuals and €7,600 for fiscal partners (2025);
- No deduction of expenses and/or investment or entrepreneurial allowances;
- No direct taxation on sales profits;
- No loss relief possibilities;
- Tax-free assets of €57,684 or €115,368 with tax partner;
- Holiday home taxation based on the so-called “WOZ value” (property value) set by the government;
- No distinction between own use or rental (subject to the deemed rental value ratio).
Example – current box 3 system:
Suppose a Belgian resident buys a second home in the Netherlands. On 1 January 2025 (reference date 2025), the taxpayer owns a holiday home with a WOZ value of €500,000, financed with a mortgage loan of €400,000. The annual income tax liability is calculated as follows:
Return on home: €500,000 x 5.88% = €29,400
Return on debt: €400,000 -/- €3,800 x 2.62% = -/- €10,380
Taxable return: €19,020
Return base: €500,000 -/- €396,200 = €103,800
Levy-free assets: -/- €57,684
Savings and investments base: €46,116
Share of return base: €46,116 / €103,800 = 44.428%
Benefit from savings and investments: €19,020 x 44.428% = €8,450
Box 3 tax: €8,450 x 36% = €3,042
The income and costs actually attributable to a holiday home are thus disregarded. This does not apply if you opt for the actual return method using the OWR form.
Future box 3 system
The new system is expected to take effect from 1 January 2028. Taxation will then be based on the actual return instead of the notional return. A capital gains tax will apply to real estate. The capital gain is taxed upon sale. In addition, taxation occurs during ownership. For this, there are three categories that apply per calendar year and per property:
- Rented at least 90% of the year: taxation on rental income minus cost of financing and maintenance.
- Not rented: additional real estate tax liability of 3.35% of the WOZ value.
- Less than 90% rented: taxation on the higher of (1) net rental income and (2) additional real estate tax liability.
The new system works as follows (note: this is based on the bill dated 19 May 2025. The final system may differ from this):
Example – future box 3 system:
Suppose a Belgian resident owns a second home in the Netherlands with a WOZ value of €500,000 in 2028. The property has been financed with a mortgage loan of €400,000. The interest charges stand at €8,000 (2%). Maintenance costs amount to €5,000. The value of the property has increased to €550,000 in 2028.
If the property is not rented out, the tax is payable on the basis of the additional real estate tax liability: €500,000 x 3.35% = €16,750. Interest expenses and maintenance costs are deductible. The Box 3 tax in 2028 then amounts to €13,25016,750 minus €8,000 minus €5,000, multiplied by 36% = €1,350 per year.
What if a Dutch national has a property in Belgium?
On the other hand, Dutch people who own a holiday home in Belgium will also have to pay taxes in Belgium. We should point out here that Dutch residents are only subject to Belgian income tax if they have also received other income from Belgium. In other words, if a Dutch resident owns a holiday home located in Belgium and does not rent it out, they will not be subject to Belgian income tax.
If the property is rented out and the Dutch resident has no other Belgian income, the amount of the property income is decisive. If this income does not exceed €2,500, no non-resident tax return needs to be filed. However, if the property income exceeds the €2,500 limit, then the owner is subject to Belgian income tax and therefore does have to file a tax return.
If a Dutch resident has received other income from Belgium besides a holiday home in Belgium, they have to file a non-resident tax return in any case. The income to be included in the return is the so-called “cadastral income” (or CI). This CI represents a notional rental value and is allocated upon occupation (and possibly revised if conversion work is carried out).
In addition, regardless of whether the property is rented out, owners also have to pay the so-called “property tax” annually.
Taxation of property income
The taxable base of the holiday home is determined by increasing the rounded indexed CI by 40%. For assessment year 2025 (income 2024), this indexation coefficient is 2.1763.[1] The indexed CI will eventually be taxed at progressive rates.
Example:
- CI of the holiday home: €1,500
- Indexed CI (rounded): €1,500 x 2.1763 = €3,264
- Taxable income: €4,570
- Tax payable (in case of rental and any income): €1.222[2]
- Estimated property tax: €1,429
Of course, the Dutch resident may not have owned the holiday home located in Belgium for a full year. In this case, they only have to include the property income (the CI) for the number of days they owned the holiday home in their tax return.
Other concerns
Besides the tax implications set out above, there are some other aspects that Belgian or Dutch residents should be aware of when owning a property:
- When buying an existing property, taxes are also due: The so-called transfer tax in the Netherlands or registration duties (the right to sell) in Belgium;
- Are you buying a new home or having one built? Then you will not pay transfer tax. Instead, you will pay 21% sales tax (VAT) on the purchase price;
- If, as a Belgian resident, you purchase a holiday home in the Netherlands, you must report it to the Belgian tax authorities within four months;
- Examine the implications of your death. In which country is inheritance tax levied on property purchased abroad?
- Think ahead: do you want your children to share in future revenue?
- Explore your financing options: Is it best to opt for equity, external financing or both?
As you can see, there is a lot involved when you purchase a property abroad. If you would like to know more about this, feel free to contact us.
[1] For assessment year 2026 - income year 2025, the indexation coefficient is 2.2446.
[2] When calculating the tax payable, the system of privileged taxpayers in the tax of non-residents and any tax benefits that may result was disregarded.
