From 2028, the Netherlands is planning something big and unusual: investors would have to pay tax each year on the increase in value of their investments even if they haven’t sold anything. That means tax could become due on so-called “paper gains” — rises in the value of shares, ETFs or cryptocurrencies — without any money actually having been received.
At present, Dutch investors pay tax based on an assumed flat-rate return under the existing “Box 3” system. Courts have ruled this model unlawful. The government is now replacing it with a new system. In future, income tax is intended to be charged on the actual annual increase in value of assets, even without a sale.
A single tax rate of around 36 per cent is planned for these annual gains, alongside a limited allowance. If the value of the investment falls again later, the tax already paid would still stand, although losses should be able to be offset and carried forward in future.
A key problem is this: investors might have to sell securities to pay the tax even though they have had no real cash inflow. The previous advantage of a buy-and-hold strategy — paying tax only when you actually sell — would largely disappear.
The new law replaces the old system after the Dutch Supreme Court struck down the previous taxation based on notional returns. The lower house passed the reform in early 2026. Final approval by the Senate is still pending. It is due to come into force on 1 January 2028.
In most European countries, a clear principle currently applies: capital gains are taxed when they are realised. In other words, you pay only on sale. Most major economies, including the USA, the United Kingdom and most EU member states, do not levy an annual tax on unrealised gains.
That is precisely why the Dutch model is attracting attention. It would make the Netherlands one of the few countries to tax paper gains annually. Critics warn that this could burden long-term savers, force investors to sell, and potentially drive capital — or even people — to other countries.
At present there is no EU-wide requirement to tax unrealised gains. Tax policy remains largely a national matter. Wealth taxes and capital gains taxes vary considerably across Europe, and many states have abolished broad wealth taxes again because they are administratively burdensome and can encourage people to move abroad.
Even so, the Dutch reform has sparked a wider debate about fair taxation of wealth and capital income. The European Commission is examining various models for taxing wealthy individuals. However, there are no concrete plans to introduce an annual tax on paper gains across Europe.
In many European countries, capital gains continue to be taxed only when realised, and numerous states levy no general wealth tax. At the same time, some countries are changing other parts of their tax systems. Belgium, for example, is discussing a capital gains tax on financial assets, and in the United Kingdom there is discussion about so-called exit taxes on unrealised gains when people move abroad. While that is not the same as annual taxation of paper gains, it does show that Europe’s tax-policy landscape is shifting.
The Netherlands could become Europe’s front-runner in annually taxing paper gains.
Most European states continue to stick with the realisation principle.
The reform in the Netherlands is prompting debate about taxing wealth and capital, but so far it has not triggered a Europe-wide wave.
Other tax reforms do, however, show that governments are thinking hard about new ways to tax capital.
For now, this is a national experiment rather than a European trend. Whether other countries follow will depend on how well the Dutch model works in practice. If it functions without capital flight, it could become a model for others. If it leads to economic side effects, it is more likely to serve as a warning sign.
