This post is also available in: Nederlands (Dutch)
Dutch High Counsil has now decided that an Interest Rate Swap (IRS) with a negative value is to be part of the debt in box 3.
An IRS is a complex financial product used in many loan varieties. In short a IRS is an agreement between an individual/company and the bank on the basis of which this individual/company has an obligation towards the bank on the one hand and a right against the bank on the other. The IRS is generally used to manage or hedge interest rate risks, or to speculate on developments in interest rates.
The value development of an IRS is largely dependent on the development of the fixed market interest rate. If the fixed market interest rate falls in relation to the agreed fixed interest rate, the swap will have a negative value for the individual/company and vice versa.
Last year the Dutch High Court had already decided that reimbursements paid on an IRS related to financing of own home properties were non tax deductible. The reason being that the link between the IRS and the finance loan for own home propierty was to limited to allow a deduction of costs related to this IRS.
The most recent decision to qualify such negative value of an IRS as a debt in box 3 is therefore in line with last years’ decision to view the IRS as a separate asset and liability towards the bank.
More in general, if you own a financial product abroad than for tax purposes the qualification of such product (e.g. annuities, pensions, deposits, loans and other financial plans) is to be done according to Dutch tax standards.
It is recommended that you perform such qualification as otherwise the Dutch tax office may – in case they successfully claim such product to be taxable in the Netherlands – impose additional tax assessments plus fines and interest for the prior twelve tax years.
We can assist to prepare such a qualification of your foreign financial products according to Dutch tax standards.