On February 5, 2025, State Secretary for Finance, Mr. Van Oostenbruggen, sent a letter to the Dutch House of Representatives regarding the update of valuation factors (rekenforfaits) used in gift and inheritance tax. This update is based on a research report by Deloitte, commissioned by the Ministry of Finance. The study examined the need to update these valuation factors, which play a key role in taxation based on life expectancy and interest rates.
Background: What Are Valuation Factors?
Valuation factors are used to efficiently determine the market value of assets such as usufruct rights and periodic payments, where precise valuation is complex. For example, in inheritance cases, the value of the fictitious usufruct of the compensatory claim (overbedelingsschuld) of the surviving partner to the children is calculated using these factors.
These valuation factors have remained unchanged since 1980, despite significant increases in life expectancy and declining interest rates since then.
Recommendations from the Study
The Deloitte report recommends updating the valuation factors in gift and inheritance tax to better reflect current economic conditions. The proposed changes are expected to generate an additional €190 million in annual tax revenue.
According to the study, small and medium-sized inheritances will, in most cases, be subject to lower taxation, whereas larger estates will face increased tax burdens.
Valuation factors also play a role in other tax areas, such as Box 3 of income tax, VAT, and real estate transfer tax. For Box 3, no update is proposed, as the planned new taxation on actual returns will eliminate forfeited valuation grounds altogether.
Additionally, the government has adopted the recommendation not to update the valuation factors for real estate transfer tax and VAT.
Response from the State Secretary and Next Steps
State Secretary Van Oostenbruggen has welcomed the study’s findings and endorses the recommendation to update the valuation factors in gift and inheritance tax, ensuring they reflect current economic values.
In the coming months, the government will examine how these proposed changes can be practically implemented for notaries, tax advisors, the Tax Administration, and taxpayers. A new Parliamentary letter with further details on the next steps and the expected timeline is anticipated in Q3 of 2025.
What Does This Mean for You?
The planned update of valuation factors may affect your gift and inheritance tax planning:
- Larger estates may face a higher tax burden.
- Smaller and medium-sized inheritances may, in many cases, result in lower taxation.
- These changes could impact how wealth is transferred within families.
Although the exact details are still being finalized, it is wise to start considering the impact on your estate planning now. Depending on your situation, it may be beneficial to bring forward certain gifts or review your will.