Tax Implications of Foreign Property Ownership for Dutch Residents (2025)

For the flat-rate system, something different applies: the foreign property does count as an asset in box 3. The Netherlands then applies a reduction via the proportional exemption method, based on the share of foreign assets in total box 3 assets.

This dual principle means Dutch residents with substantial foreign real estate sometimes come out better than under the old rules — as analysis by TaxLive shows.

How is foreign property valued?

The Tax Authority uses the fair market value as of 1 January of the tax year. Rented property qualifies for a discount based on the vacant-value ratio. An appraisal report from a local, independent appraiser is in practice the leading reference.

Tax treaties — no double taxation

The Netherlands has tax treaties with virtually every European country. The principle: real estate is taxed in the country where it is located ("situs principle"). The Netherlands grants relief via the proportional exemption method.

Example: a Dutch resident with €500,000 in bank balances and €1,500,000 in foreign real estate (total box 3 base €2 million) gets 75% of the box 3 levy back via the object exemption. The net Dutch levy on the foreign portion thus disappears — Spain or Portugal levies its own via IRNR/IRPF.

Filing obligation in two countries

Foreign real estate creates a filing obligation in both countries. In the destination country there is usually a separate filing for rental income and/or wealth (in France: IFI; in Spain: IRNR; in Portugal: declaration via Modelo 3 for non-residents). The Dutch Tax Authority looks at the worldwide position.

Points to watch

Ownership structure. Property held through a foreign company (SCI in France, sociedad limitada in Spain) fundamentally changes the tax treatment — often unfavourably for Dutch residents. Consult an international tax advisor in advance.

Debts linked to the property. A mortgage on a second home counts as a debt in box 3, regardless of whether the mortgage is with a Dutch or foreign bank.

Currency differences. For property in Switzerland or the United Kingdom, currency variation matters. The value is converted to euros annually as of 1 January.

Inheritance. Foreign inheritance law differs significantly. France and Spain, for example, apply mandatory heir rules that override Dutch wills — unless the will explicitly chooses Dutch law under the European Succession Regulation.

This article is informational and does not constitute tax advice. The box 3 system has been subject to continuous case law since 2022; the rules described here reflect the position on the date of publication. Always consult a qualified tax advisor for your specific situation.

Sources: Belastingdienst — box 3 · Belastingdienst — tax treaties · Supreme Court ruling 18 July 2025 · TaxLive analysis · European Succession Regulation

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