Business vs investing in property

Suppose you are letting, (re)developing or buying and selling property. Or you are invited to participate in an investment project in which this type of activity takes place. You may then be at the interface between business and investing. This may have consequences for your income tax return.

What are the tax consequences?

There are two options in the abovementioned scenarios:

  • the proceeds of your activities constitute the ‘result from other activities’ (part of box 1)
  • the asset component with which the activities are carried out falls into to box 3

The tax consequences of qualification in box 1 or box 3 differ widely. For example, benefits in box 1 are taxed with a maximum of 52% income tax. Losses are deductible. In box 3, the net assets are taxed at an effective rate of 0.58% to 1.68%. Losses are not deductible.

Forvis Mazars can assist you

Forvis Mazars Private Clients specialises in complex box 1 - box 3 issues. We have quite extensive experience in the field of tax issues relating to large and small property projects and other forms of property development, as well as the setting up and structuring of property lease portfolios. The chosen structure, in line with your and the next generation's estate planning, is decisive for securing the desired treatment in relation to taxation. If necessary, we will consult with the Tax and Customs Administration for you on this matter. However, it is essential to seek advice in good time, because a debate about a wrongly chosen structure may have considerable financial consequences.

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