The imputed income from an owner-occupied residence is an amount that homeowners must include as Box 1 income in their annual tax return. The applicable percentage increases in proportion to the value of the owner-occupied residence. In most cases, this amount is 0.55% of the “WOZ” value, but this tax regime continues to be unfavorable for more expensive residences, which are subject to what is popularly called a “villa rate”.
In 2008, the maximum amount to be added to income was EUR 9,300, but this maximum was removed in 2009. In addition, as of 2010 through 2016, the imputed income for an owner-occupied residence valued at more than approximately EUR 1 million will be increased annually in more or less equal steps beginning in 2010 with 0.8%, increasing to 1.05% in 2011, and ultimately reaching 2.35% in 2016. In 2010, the higher percentage was applicable to the extent that the owner-occupied residence was valued at more that EUR 1,010,000; in 2011 this amount is EUR 1,020,000.
However, it could have been worse. The previous government had intended to drop the rule under which the upper limit was to be increased annually in line with inflation. This would have resulted in increasingly more people suffering the adverse effects of the “villa” tax. When the previous government fell, the Lower House quickly pronounced as controversial the bill to withdraw the indexing of the imputed income from an owner-occupied residence. In practice, this meant that the bill could no longer be debated by the Lower House, and now the new government has decided not to proceed with the bill.
In the meantime, Mr. Weekers, the Deputy Minister of Finance, has calculated that for owner-occupied residences valued at EUR 350,000, the top rate would be applicable in 30 years. The annual increase in property values has apparently been estimated at approximately 3.75% per annum. For the owner of a residence with a 2008 value of EUR 2 million, such an increase would result in the addition to income for the owner increasing from EUR 9,300 in 2008, to EUR 44,916 in 2016. Assuming that the “indexing” proceeds at approximately the same pace as the growth in property values, the imputed income from an owner-occupied residence will see a threefold, rather than a fivefold, increase. Nevertheless, this still involves a considerable increase of the financial burden.