We love Selling Sunset. A terribly hysterical estate agent show set on the west coast of America. The agents there walk around in enormously high heels. Go to work in a bikini. Drink the most exotic cocktails all day long and argue with each other all day. They sell the most beautiful houses, and practically all the ladies have had a relationship with the boss at some point.
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What a boring housing market we have, then 😉 Although Gé and I are a couple too, and we do occasionally sign a purchase agreement on the boat, so a client might see us in swimwear. Beyond that, there aren't that many similarities. This season the luxury homes have to be sold quickly before a certain date. The ‘Mansion Tax’ is coming in. More tax has to be paid on the purchase of a villa. In the Netherlands we have a tax like that too. It just works slightly differently.
Eigenwoningforfait
The eigenwoningforfait (the notional rental value of your own home) is a tax rule that applies to homeowners in the Netherlands. It represents the amount that has to be added to your income because you own your own home. This amount is seen as a kind of ‘notional income’ that is taxable, even if you don't receive any actual income from the home. The idea behind it is that homeowners enjoy a certain benefit from living in their home, which is offset by the tax on this notional benefit.
How is the eigenwoningforfait calculated? It's calculated as a percentage of the WOZ value of your own home. The WOZ value is the estimated value of the home as determined by the municipality. The eigenwoningforfait percentage varies according to different bands of WOZ value, as set by the government.
The eigenwoningforfait is added to the owner's taxable income and taxed at the applicable tax rate. The aim of the eigenwoningforfait is to create a certain balance between homeowners and tenants, since tenants can enjoy comparable benefits in the form of housing benefit. It also contributes to the government's tax revenue.
First of all, the eigenwoningforfait. This is a tax addition to your income for an owner-occupied home. It applies to everyone who owns a home and lives in it themselves.
What is the eigenwoningforfait for?
The eigenwoningforfait helps create a certain balance between homeowners and tenants in the tax system by offsetting the tax advantage that homeowners enjoy. This balance is important to guarantee equality and fairness within the tax system, especially with regard to how different forms of housing are treated.
Tenants usually receive housing benefit or other forms of rent compensation, depending on their financial situation. The eigenwoningforfait is a way of taxing a similar advantage that homeowners have. It represents a kind of ‘notional income’ that is added to the owner's taxable income, even if the home doesn't generate any direct income.
This system helps the government maintain a certain degree of balance between how tenants and homeowners are treated within the tax system. By applying the eigenwoningforfait, the government ensures that homeowners, who benefit from advantages such as not paying rent and building up wealth through property ownership, also contribute to the government's tax revenue.
In this way the tax system aims to maintain a certain degree of equality between different forms of housing, with the goal of levying fair taxes and achieving a balanced financial burden between homeowners and tenants. This is essential for maintaining a fair and balanced tax system and for strengthening social cohesion within society.
Villa tax
This tax burden on more expensive homes is also known as the villa tax (villataks). This measure was introduced to increase the tax on expensive houses and so bring more balance to the tax system. The villa tax is in effect an additional tax that applies to homeowners with a home worth more than €1,200,000.
The eigenwoningforfait is calculated as a percentage of the home's WOZ value, depending on the value of the home, according to the following table:
- For homes with a WOZ value between €75,000 and €1,200,000, the percentage is currently 0.35%. Suppose the WOZ value of your house is €600,000; then the eigenwoningforfait is €600,000 x 0.35% = €2,100 per year.
- For homes with a WOZ value above €1,200,000, an amount of €4,200 applies, plus 2.35% of the value of the home above €1,200,000. Suppose the WOZ value of your villa is €1,500,000; then the eigenwoningforfait is €4,200 + (€1,500,000 – €1,200,000) x 2.35% = €4,200 + €3,525 = €7,725 per year.
Wet Hillen
The Wet Hillen (Hillen Act), named after former member of parliament Hans Hillen, was a tax measure that meant people with an owner-occupied home and little or no mortgage debt didn't have to pay an addition for the eigenwoningforfait. In other words, if the eigenwoningforfait was higher than the deductible costs for the home, you didn't have to pay any addition. This applied in particular to people who had paid off most or all of their mortgage.
This measure was intended to encourage people to pay off their mortgage and so reduce homeowners' financial vulnerability. It was a tax advantage for people who showed responsible financial behaviour by actively paying off their mortgage debt.
However, since 2019 the Wet Hillen has been gradually phased out over a period of 30 years. This means the tax advantage is slowly being reduced until it is eventually abolished altogether. The phasing-out of the Wet Hillen was introduced as a measure to make the tax system more balanced and to create more equal treatment between homeowners with and without mortgage debt.
Besides the phasing-out of the Wet Hillen, there's also the phasing-out of the deduction for having no or only a small mortgage debt. This measure means that the tax advantage for people with a small mortgage debt or none at all is gradually being reduced. In other words, the deductions for homeowners with little or no mortgage debt are gradually being phased out.
These measures are part of the government's broader efforts to reform the housing market and maintain a more balanced and fair tax system.
Update
The villa tax, which taxes homeowners with homes above €1,310,000 more heavily, is meeting more and more resistance. In 2024 there was a rise in objections, mainly because of the legal uncertainties surrounding the tax. Lawyers and experts argue that the villa tax may be in breach of the European Convention on Human Rights (ECHR) and does not square with the principles of the Wet IB 2001 (the Income Tax Act 2001). The discussion revolves around whether this tax, originally intended to offset tax advantages, is fair, especially now that smaller homes are also falling under it because of rising house prices.
In addition, there's growing criticism of the tax because the villa tax threshold hasn't been indexed in line with rapidly rising house prices. The extra tax now applies not only to luxury villas, but more and more often to terraced houses in the city as well. More and more houses are falling under the villa tax. Objections to the tax are being filed more and more often, and there's a growing number of legal proceedings, the outcome of which could lead to changes in the legislation.
For homeowners it's important to follow developments closely and, if necessary, to object to their tax assessment. Advice from an expert can be very valuable here.
Buying a house?
So it can be advantageous to buy a home with a WOZ value below €1,200,000. Take a look at our listings for a home below the villa tax threshold 😉
