Renting out your property in 2023? 5 changes to the tax system to consider

Are you planning to rent out a property or other premises in 2023? Or are you already an active real estate investor? Then the government plans for 2023 will affect your returns. Five changes to the tax system, announced on Budget Day, are important for real estate investors.

1. Higher transfer tax

Currently, if you buy a property that is not used as your main residence, you pay 8% transfer tax. This applies, for example, to holiday homes, rental properties, or non-residential properties (such as office buildings). This transfer tax will be increased to 10.4% as of January 1, 2023. This change will impact your wallet as a real estate investor and aims to give first-time buyers and people moving up the property ladder (who pay much lower transfer tax) a better position in the housing market.

2. Revised vacancy ratio

As a real estate investor, you pay wealth tax in box 3 on the WOZ value of your property. However, this WOZ value is adjusted downwards if your property is rented out to a tenant with rental protection (with a permanent contract). The idea is that a rented property is worth less than an empty one, so you pay less wealth tax. 

The discount on the WOZ value is calculated using the so-called "vacancy ratio": the ratio between the WOZ value of the property and the rental income. Currently, with a favorable vacancy ratio, you can get up to a 55% discount on the WOZ value. But this will change as of January 1, 2023. The vacancy ratios will be revised to the detriment of real estate investors, reducing the maximum discount to only 27%. If you rent to affiliated parties, such as family, the discount will be completely eliminated.

3. A new box 3 system

The box 3 system will undergo a complete overhaul in 2026, but the first changes will be implemented in 2023. The goal? To tax the actual returns on box 3 assets as accurately as possible, meaning both the income and the value development. Therefore, in 2023, a bridging law will be introduced, which will tax both your assets, savings, and debts. This bridging law is particularly disadvantageous for real estate investors who have financed their properties with a loan and thus have debts. They will pay more tax on the financed portion. On average, you can expect an increased burden of about one percent of the borrowed amount.

Additionally, the tax rate on income from assets (your rental income) will be increased. Currently, this is 31%, but in 2023 it will rise to 32%, and further increase to 34% in 2025. 

4. No longer excessively borrowing from your own BV

Maybe, as a real estate investor, you have set up a clever arrangement with a private limited company (BV). By putting your money into a BV and lending it to yourself, your BV doesn't have to pay out dividends, deferring tax on those dividends in box 2. The government plans to put a stop to this. From January 1, 2023, if you borrow more than 700,000 euros from your own BV, you will have to pay income tax in box 2 on the amount above that threshold. This does not apply if you borrow the money from the BV for your own home.

5. Mandatory sustainability measures

Apart from higher tax obligations, real estate investors will also face mandatory costs. In the context of sustainability, office buildings larger than 100 square meters will be required to have energy label C as of January 1, 2023. Without this energy label, the property cannot be used or rented out. A similar rule will likely apply to residential properties with energy labels E, F, or G in 2030. If you rent out such a property, it would be wise to start with sustainability measures now.

What are the consequences for you? 

Most real estate investors will see their returns decrease in 2023. And if you plan to start renting out in 2023, you may need to adjust your financial calculations. Of course, successful real estate investment is still very possible. The advisors at Koops Makelaardij know exactly how to maximize returns on your real estate portfolio. We would be happy to provide you with tailored advice and take all the management off your hands. Contact us today for a free consultation!