The Dutch government, along with the lower house of parliament, has approved a contentious tax reform that will impose taxes on unrealized capital gains, set to take effect in 2028 after pending approval from the upper house, the Senate. This reform targets investors whose capital gains, defined as the increase in market value of investments that have yet to be sold, will now be taxable even before they materialize as actual profit.

Investors typically only face taxation on capital gains when they sell their assets, resulting in a tax only on realized profits. However, under the new proposal, individuals will need to pay tax on increases in investment value, referred to as unrealized gains, which exist only on paper and have not yet been received. For instance, an investor who buys shares for €100 and sees their value rise to €150 will now be liable for taxes on that €50 increase, which would be taxed even though the shares have not been sold.

The tax rate is set at a substantial 36%, focusing mainly on liquid assets such as stocks, bonds, and cryptocurrencies. This reform has sparked debate about its implications for investor behavior and the broader economic landscape, as it introduces a new precedent in taxation that could potentially discourage investment or alter market dynamics in the Netherlands.