Imagine your parents have planned well. They own two properties worth €1 million and want to leave everything to you, their only child. You’re set for life, right? Not so fast. The Belastingdienst (Tax Authority) will send you a bill for roughly €179,000 before you can call those houses yours. This isn’t a hypothetical, it’s the exact scenario facing a Dutch resident planning for their parents’ future.
The math is brutal. After the €26,230 exemption for children, you pay 10% on the next €158,669 and 20% on everything above that. For a million-euro inheritance, that totals €178,887 in inheritance tax (erfbelasting). Most people don’t have that kind of cash lying around, which creates an immediate problem: how do you pay the tax without being forced to sell the properties you want to keep?
The 2026 Dutch Inheritance Tax Reality Check
Dutch inheritance tax operates on clear but steep progressive rates. For children and direct descendants, you get a €26,230 exemption (vrijstelling) per parent. After that, the tax hits in two brackets:
– 10% on the portion up to €159,000 (approximately)
– 20% on everything above that threshold
The calculation stacks up quickly. On €1 million, you’re looking at nearly €180,000 due to the government. This applies even if the inheritance consists entirely of illiquid assets like real estate.
The good news? 2026 brings meaningful changes that give you breathing room. The filing deadline extends from 8 to 20 months after death, and interest only starts accruing after that period. You now have nearly two years to arrange financing, plan valuations, or structure your affairs without the clock ticking menacingly in the background.
Financing the Tax Bill Without Selling
Can you borrow to pay inheritance tax? Yes, but the options come with Dutch-specific constraints.
Mortgage on inherited property: Banks will lend against real estate, but they require official valuations and proof you can service the debt. As one financial planner notes, lenders want to see income, not just assets. If you’re inheriting rental property, they’ll scrutinize the rental income coverage ratio. For a property you plan to live in, your personal income becomes the limiting factor.
Payment arrangement (betalingsregeling): The Belastingdienst offers installment plans, but they charge interest. The rate hovers around 4-5%, making it comparable to bank financing. The extended 20-month filing period means you can negotiate terms before the debt becomes overdue, giving you leverage to structure manageable payments.
Personal loan: Unsecured loans for tax payments are possible but expensive, with rates often exceeding 6%. This only makes sense for small shortfalls, not six-figure tax bills.
The critical insight: start these conversations before you need the money. Banks move slowly in the Netherlands, and the notaris (notary) handling the estate can provide documentation that strengthens your application.
Smart Planning Strategies That Actually Reduce Your Bill
The most effective tax reduction happens before death. Dutch law provides several legitimate tools:
Annual tax-free gifts (schenkingen): Parents can gift €6,662 per child annually tax-free. Over a decade, that’s €66,620 moved out of the taxable estate. For larger amounts, the general gift exemption is €26,730 per donor per year, usable for any recipient.
Gradual property transfer: Transferring portions of property over multiple years spreads the tax burden. Each year’s transfer falls under fresh exemptions. One commenter suggested this approach, noting it pushes more value into the 0% and 10% brackets instead of the 20% rate.
Schenking op papier (gift on paper): This Dutch technique involves gifting property while retaining a mortgage claim against the child. The child receives the asset but owes the parent a debt. The parent can then forgive €6,662 of that debt annually tax-free. It’s complex and requires notarial execution, but it systematically reduces the taxable estate while keeping control during parents’ lifetime.
Transfer tax trap: When gifting property, you trigger overdrachtsbelasting (transfer tax) of 2-10% depending on the property type. However, you can offset this against gift tax to avoid double taxation. The 2026 rule changes make this offset explicit, but you must claim it correctly in your tax return.
The Rental Property Valuation Trap
Here’s a detail many heirs miss: a tenanted property is worth significantly less than a vacant one. Dutch tax law values inherited property at fair market value, and a property with sitting tenants sells at a discount, often 20-30% below vacant possession value.
If your parents’ €650,000 property has long-term tenants, the actual taxable value might be €455,000. That’s a €195,000 reduction in your tax base, saving you €39,000 in inheritance tax. Conversely, if you inherit a vacant property and plan to rent it out, its value for tax purposes remains the higher vacant value.
Always commission an independent valuation that factors in rental status. The Belastingdienst accepts professional appraisals but will challenge obviously low estimates.
How This Connects to Box 3 Wealth Tax
Inheriting property doesn’t just trigger inheritance tax, it dumps you into the Dutch wealth tax system. The entire value counts toward your Box 3 assets, taxed on a deemed return of around 6% regardless of actual rental income.
The upcoming Box 3 reform in 2028 will shift to taxing actual returns, which could benefit property owners if rental yields are low but capital gains are high. However, it also means you’ll need to track actual income and expenses meticulously.
For those pursuing FIRE (Financial Independence, Retire Early) in the Netherlands, a large property inheritance can derail plans. The Box 3 tax bomb means you’re paying tax on unrealized gains, and the inheritance tax bill could consume capital you planned to live on. Dutch FIRE calculations must account for these wealth taxes, which many expats underestimate.
Your Action Plan Before the Notary Visit
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Get current valuations for all properties. Use a registered appraiser who understands the rental discount issue.
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Model the tax bill using current rates and exemptions. The €179,000 figure is a starting point, your reality may differ.
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Explore gifting strategies that fit your parents’ financial security. They shouldn’t gift themselves into poverty.
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Investigate financing pre-approval. Know what banks will lend against the properties before you need it.
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Review the will (testament) for flexibility. A well-drafted will can allow the executor (executeur) to sell property to pay taxes if needed, or grant you time to arrange financing.
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Document everything. The Belastingdienst increasingly scrutinizes late-life transfers. Clear records of intent and timing protect against anti-avoidance challenges.
The Bottom Line
Dutch inheritance tax on property is a liquidity crisis waiting to happen. The 2026 changes give you time, not relief. The extended filing period and equal treatment for biological children are helpful, but the rates remain steep.
The families who navigate this successfully plan years ahead, use annual exemptions religiously, and understand that property wealth in the Netherlands comes with a tax cost that can’t be avoided, only managed. Start the conversation with your parents now, while they’re healthy and have options. Waiting until the notary appointment is already too late.
