The Dutch government just turned long-term investing into a high-stakes chess match. Starting in 2028, the new Box 3 (wealth tax box) system will tax unrealized investment gains, meaning you’ll owe the Belastingdienst (Tax Authority) money on profits you haven’t actually seen in your bank account. This shift has triggered a quiet scramble among investors for loopholes, and one controversial strategy is gaining traction: dumping growth stocks for dividend-paying shares to minimize taxable “growth.”
The New Box 3 Reality: Why Investors Are Panicking
The Tweede Kamer (House of Representatives) approved the Wet werkelijk rendement box 3 (Act on the Actual Return on Box 3) on February 12, 2026, with a target launch of January 1, 2028. The system replaces fictional returns with real ones, taxing interest, dividends, and crucially, paper gains on your portfolio. For a deep dive into the structural changes, see a comprehensive overview of the 2028 Vermogensbelasting reform and its implications for investors.
Here’s the kicker: you’ll pay 36% tax on returns above the €1,800 tax-free threshold (€3,600 for partners). That includes the €10,000 your ETF gained last year, even if you never sold a single share. The Belastingdienst will receive data directly from banks and brokers, making manual reporting more complex while automating surveillance.
Many investors who built portfolios around volatile multibaggers now face a liquidity crisis. They may need to sell assets each year just to pay the tax bill, forced to time the market annually. The sentiment among international residents is that Dutch bureaucracy ranks among the most confusing systems they’ve encountered, especially when it comes to navigating these new wealth taxes.
The Dividend “Loophole” Explained
The strategy is deceptively simple: shift your portfolio entirely into low-volatility dividend stocks. Think mature, stable companies like American REITs or Dutch utilities that trade in narrow ranges but pay steady dividends. The logic? Lower volatility means minimal price appreciation, thus minimal vermogensaanwasbelasting (capital growth tax). Meanwhile, dividends, already taxed at 15% at source, provide cash to cover the remaining Box 3 bill.
One investor outlined the approach: use dividend income to pay the ridiculous 36% tax on any modest gains, avoiding forced sales of your principal. Some propose a 50/50 split: half dividend stocks to generate tax money, half growth stocks to maintain upside. The core idea is making the wealth tax manageable for those whose investment gains outpace their disposable income.
This isn’t about optimizing returns, it’s about survival. As one commenter noted, many investors built substantial portfolios through volatile stocks but can’t spare income to pay wealth tax on paper gains. The money must come from somewhere, and forced selling creates a cascade of bad decisions.
The Math: Does It Actually Work?
Let’s run the numbers. Under the new system, if Joost owns €100,000 in stocks on January 1, receives €3,000 in dividends, and his portfolio ends the year at €110,000, his taxable result is €12,500 (€3,000 dividend + €10,000 appreciation – €500 costs). After the €1,800 exemption, he pays 36% on €10,700, totaling €3,852 in Box 3 tax.
Now imagine Joost held only low-volatility dividend stocks that stayed flat at €100,000. His €3,000 dividend income minus costs leaves him with perhaps €2,500 taxable. After exemption, he pays 36% on €700, just €252. The 15% dividend withholding tax already took €450, but his total tax burden is still far lower than the growth-stock scenario.
The problem? That €10,000 paper gain would have compounded for decades. By avoiding it, you avoid the tax, but also the growth. You’re essentially paying the Belastingdienst in lost opportunity rather than cash.
Why This “Solution” Creates Bigger Problems
First, dividend stocks are not tax-efficient under Box 3. The 15% withholding tax is just a prepayment. Your dividend income still counts toward your total return, taxed at 36%. You’re paying tax twice: once when received, again via Box 3. The only “benefit” is avoiding unrealized capital gains, but that’s where real wealth is built.
Second, this strategy locks you into mature, low-growth companies. While stable, these stocks won’t deliver the 9% historical returns of global indices like the MSCI ACWI. You’re sacrificing long-term compound growth for short-term tax smoothing. The role of dividend-focused funds in minimizing tax leakage under Dutch tax rules is often overstated when dealing with vermogensaanwasbelasting.
Third, political risk looms large. The current coalition (D66, VVD, CDA) already admits the capital growth tax is flawed. They’ve committed to transitioning to a vermogenswinstbelasting (capital gains tax) by 2029, where you’d only pay tax upon sale. If that happens, dividend-focused investors would have missed years of growth for nothing. The shift from flat fictional returns to real capital gains taxation is explored in the shift from flat fictional returns to real capital gains taxation in Box 3.
Better Alternatives to Consider
Rather than sabotaging your returns, consider these legitimate strategies:
1. Pension Investing
Use your jaarruimte (annual pension allowance) to invest through tax-deferred pension accounts. This completely avoids Box 3 until withdrawal. How the new Box 3 tax rules are reshaping long-term investment choices between pension and regular accounts shows why this is increasingly attractive.
2. Beleggings BV
For larger portfolios, a Beleggings BV (investment private limited company) lets you invest at corporate tax rates (around 20%) and defer personal tax until you withdraw profits. While administratively heavier, it avoids the annual wealth tax drag. Using a Beleggings BV as an alternative tax-efficient structure amid Box 3 reforms is detailed here.
3. Strategic Debt
Taking on debt to invest (leverage) can offset your taxable wealth, though this introduces significant risk. The strategy of strategic debt use to offset taxable wealth under the new Box 3 system is examined in this analysis.
4. Wait and See
Given the political uncertainty, some investors are parking cash in deposit ladders until 2029. If the promised capital gains tax materializes, the entire dividend strategy becomes moot. The impact of taxing unrealized gains on illiquid assets like startup investments could force policy changes, as discussed in the impact of taxing unrealized gains on illiquid assets like startup investments.
The Bottom Line: Don’t Let the Tax Tail Wag the Investment Dog
The dividend “loophole” is less a strategy than a panic response. It solves a liquidity problem by creating a bigger wealth problem. You’re trading decades of compound growth for modest tax smoothing on an annual basis. For those considering a BV structure for investment purposes in response to higher personal wealth taxes, the analysis shows it’s only viable at much higher portfolio values.
The new Box 3 system is punitive, but it’s also potentially temporary. Many expats report that the Amsterdam financial advisory market is struggling to give clear guidance because the rules keep shifting. The prevailing advice: maintain a globally diversified portfolio, maximize pension contributions, and don’t make drastic changes based on a tax regime that might not survive its first government.
If you’re running a sole proprietorship and considering a BV purely for investment tax benefits, considering a BV structure for investment purposes in response to higher personal wealth taxes is likely overkill until your portfolio exceeds €500,000.
The dividend strategy might feel clever, but it’s the financial equivalent of burning your furniture to heat the house. You’ll stay warm this winter, but you’ll regret it when spring comes.
