Dutch startup investors are facing a tax policy that reads like a financial horror story. The new Box 3 (wealth tax) system, set to fully activate in 2028, will tax the annual increase in value of your startup shares, even if you cannot sell them. This creates a forced-liquidation scenario where a single volatile year could permanently wipe out your position, not through market losses, but through tax bills you cannot afford to pay.
The policy has sparked intense debate among investors, with many concluding that startup investing will become structurally impossible for anyone without millions in liquid assets. The core problem is brutal in its simplicity: you pay tax on paper wealth while holding an illiquid asset, and if the value crashes the following year, you cannot claw back the previous year’s tax payment.
How Box 3 Turns Volatility Into a Wealth Destroyer
Under the Werkelijk Rendement Box 3 (Actual Return Box 3) system, your taxable base is the value of your assets on January 1 each year. For publicly traded stocks, this is inconvenient but manageable, you can usually sell a portion to cover the tax. For startup shares, it’s catastrophic.
Consider a typical startup investment trajectory:
– Year 1: You invest €50,000 in a mining startup that discovers a resource reserve. The share price jumps 300% to €200,000 by January 1.
– Year 2: The company spends the year securing permits. The share price drops 60% to €80,000 by the next January 1.
Under the new system:
– On January 1 of Year 2, you owe 36% tax on the €150,000 “gain” from Year 1, €54,000 due.
– Your position is now worth €80,000, but you owe €54,000 in cash.
– If you cannot pay from other sources, you must sell shares during a downturn, crystallizing losses and likely exiting your entire position.
This scenario isn’t hypothetical. Startup investors report that swings of +300% followed by -60% occur multiple times during a typical 5-7 year holding period. The old Box 3 system used a fictional return percentage that was predictable and relatively low. The new system uses actual market values, making it “unprecedented”, the Netherlands will be virtually the only country taxing unrealized gains this aggressively.
The Unclear “Startup Exception” That Offers Little Comfort
The government has acknowledged the problem, sort of. A special capital gains tax (vermogenswinstbelasting) is supposed to apply to shares in “starting enterprises” (startende ondernemingen), exempting them from the standard Box 3 treatment. But the definition remains undefined as of early 2026.
State Secretary Heijnen of Finance stated in a letter to Parliament that a separate legislative proposal will be submitted by March 2026, with a target implementation date of January 1, 2027. The new definition would then apply from 2028 onward in the Box 3 system.
This leaves investors in a dangerous limbo. The Dutch tax authority (Belastingdienst) will rely on RVO (Netherlands Enterprise Agency) to issue determinations valid for 8 years, renewable in 5-year periods. But critical questions remain unanswered:
- What qualifies as a “startup” versus a “scale-up”?
- Do publicly listed companies count if they’re still in growth phase?
- What happens if the company pivots or matures during your holding period?
The ambiguity has already affected behavior. Investors report that the lack of clarity makes long-term planning impossible. If your mining company, initially a startup, is reclassified as a mature business after a few years, you could suddenly face the standard Box 3 treatment retroactively.
The BV Workaround: A Complex Escape Hatch
Faced with this tax trap, many investors are exploring the BV (private limited company) structure as an alternative. Instead of holding startup shares personally in Box 3, you would create a holding BV that owns the shares. The BV pays corporate tax (vennootschapsbelasting) on actual profits when realized, not annual paper gains.
This approach has advantages:
– Deferred taxation: Tax is paid only when the BV sells shares and realizes actual profit
– Lower rates: Corporate tax is 19-25.8%, plus 26.9% Box 2 tax on dividends, totaling roughly 36-40%, potentially lower than the effective Box 3 rate during high-growth years
– Loss offset: Realized losses can offset other gains within the BV
But the transition is messy and costly:
– You must sell your personal holdings and repurchase through the BV, triggering transaction costs and potentially capital gains tax during the transition
– The BV requires proper administration, annual filings, and at least €1 in share capital
– For monthly investors, the process becomes administratively heavy, you cannot simply transfer existing personal holdings without a taxable event
One investor’s plan illustrates the complexity: “I’m selling my Box 3 shares and buying them via my business account. Those extra transaction costs, I’ll just absorb them.” For those wanting to continue monthly investing after moving existing holdings, the logistics remain unclear, each new purchase requires routing through the BV’s business account.
The Innovation Kill Factor
Beyond individual portfolios, the policy threatens the Netherlands’ startup ecosystem. The country needs more risk capital, not less. Taxing paper gains increases investor risk and reduces expected net returns, directly discouraging investment in young, innovative companies.
The petition against these changes highlights that “just in the Netherlands (and Europe) more risk-bearing capital is needed to finance startups and innovation.” By making startup investing structurally unattractive for retail investors who provide crucial early-stage funding, the policy could drive capital flight and reduce the taxable base long-term, ironically lowering total tax revenue.
The sentiment among investors is clear: this policy literally helps no one. The government collects less overall, wealth and taxable capital in the country shrink, and investors face higher risks. The only winners might be tax lawyers and accountants billing hours for complex BV structures and RVO applications.
What Investors Should Do Now
If you hold startup investments or plan to, take these steps immediately:
1. Clarify your holdings’ status: Determine if your investments might qualify for the startup exception. Publicly listed companies, even if volatile, likely won’t qualify. The definition is still pending, but the direction points toward non-listed, early-stage companies only.
2. Calculate your tax bomb scenario: Model what happens if your portfolio doubles by January 1, then drops 50% by the next year. Can you pay the tax bill without selling? If not, you face forced liquidation risk.
3. Consider the BV transition before 2027: Moving to a BV structure after the new system activates won’t erase the tax problem, you’ll still owe Box 3 tax on any personal holdings. The transition must happen before the valuation date.
4. Monitor the March 2026 proposal: The definitive startup definition will arrive then. If your investments don’t qualify, the BV becomes your only viable alternative.
5. Sign the petition: While political pressure may not reverse the policy, it signals to policymakers that the implementation timeline and definitions need urgent refinement.
The broader context is that the Netherlands is shifting to one of the world’s most aggressive wealth tax systems, as detailed in analysis of proposed changes to Dutch Box 3 taxation on unrealized investment gains. For startup investors, the combination of illiquidity and extreme volatility makes this policy uniquely destructive.
The Bottom Line
The new Box 3 system transforms startup investing from a high-risk, high-reward activity into a mathematically losing proposition for retail investors. The tax creates a positive feedback loop of forced selling during downturns, exactly when you should hold. Unless you have sufficient liquid assets to pay taxes on paper gains for 5-7 years without selling, you cannot afford to invest in startups under this system.
The promised startup exception offers hope, but its undefined scope and delayed implementation leave investors exposed. The BV workaround provides an escape, but at the cost of complexity, transition taxes, and ongoing administrative burden.
For now, the only prudent action is to pause new startup investments until the March 2026 definitions are published. If your current holdings don’t clearly qualify for the exception, begin planning your BV transition immediately. The tax bomb’s timer is ticking, and waiting for clarity could cost you your entire position.
The policy’s architects likely didn’t intend to destroy Dutch startup funding, but the math doesn’t lie. In a volatile asset class, taxing unrealized gains annually is equivalent to guaranteeing that investors cannot hold through the necessary cycles for success. For the Netherlands’ innovation economy, that may be the most expensive tax revenue never collected.
