Source: Cryptonews Original Title: https://coinpedia.org/news/netherlands-plans-to-tax-unrealized-bitcoin-gains-starting-2028/ Original Link:

Netherlands’ Box 3 Reform: Annual Tax on Unrealized Crypto Gains Starting 2028

The Netherlands will implement a comprehensive tax reform targeting unrealized capital gains on January 1, 2028, requiring investors to pay annual taxes on assets including Bitcoin, cryptocurrencies, stocks, and bonds even when they have not been sold, according to the government’s Box 3 Actual Return Tax Law.

Key Details of the New Tax System

The reform will tax most liquid financial assets based on actual annual value changes rather than assumed returns, with a projected tax rate of 36% of the actual return. For cryptocurrencies and other liquid investments, authorities will apply a capital growth method comparing asset values at the start and end of each tax year, with any increase becoming immediately taxable regardless of whether gains have been realized through sales.

The system includes limited relief provisions:

• Unrealized losses may be carried forward to offset future gains
• A proposed €1,800 tax-free threshold per person applies to total annual results
• Real estate and certain start-up investments are excluded from annual unrealized gain taxation

Background and Rationale

The reform follows multiple rulings by the Dutch Supreme Court declaring the previous Box 3 system unlawful because it taxed investors on assumed returns that often did not reflect actual performance. Government estimates indicate that postponing the reform beyond 2028 would cost the state between €2.3 billion and €2.5 billion per year in lost revenue.

Concerns About Liquidity and Volatility

Critics, including investors and lawmakers, have raised significant concerns about liquidity risks. Taxing unrealized gains could force individuals to sell portions of their portfolios to cover tax bills even when assets generate no cash flow. The concern is particularly acute for volatile assets such as cryptocurrencies, where sharp price fluctuations could create tax liabilities that require asset sales to manage.

Enhanced Enforcement and Data Sharing

Enforcement will be enhanced through expanded data sharing. By 2028, crypto-asset service providers must comply with the European Union’s DAC8 Directive, which mandates direct reporting of transaction and balance data to national tax authorities. In the Netherlands, this information will be transmitted directly to tax authorities, aligning cryptocurrency reporting with existing bank reporting standards.

Global Context

The implementation would position the Netherlands among the most stringent jurisdictions globally for taxing unrealized gains. For cryptocurrency investors, the shift represents a fundamental change to portfolio strategy, cash management, and long-term holding considerations ahead of the 2028 effective date.