Compounding your wealth: a Box 3-aware growth simulation

Box 3 tax is a recurring yearly charge: every euro you pay towards it stops earning a return from that point on — a tax bill of €1,958 (this article's worked example) left invested for 10 years at 7% instead would have grown to roughly €3,852, nearly double.

This article explains why a recurring tax charge behaves differently from a one-off cost. It is not tax advice — for the current Box 3 figures and your personal situation, see the article on Box 3 tax or consult the Belastingdienst.

Why a yearly tax charge behaves differently from a one-off cost

With cost drag, fees shave off a small piece of your return every single year. Box 3 tax works the same way at its core: it is not a one-off bill you feel once, but a recurring yearly charge that grows along with your wealth. The difference from a regular cost is that you pay it separately from your portfolio — but the money you spend on it can no longer compound anywhere, either. We’re often asked why Box 3 feels heavier than the amount on your tax bill — the answer lies in what that money could have become, not in what you pay.

Worked example: what one year of tax costs you long-term

Take the worked example from the article on Box 3 tax: a €150,000 portfolio results in roughly €1,958 in Box 3 tax for 2026.

Now suppose that, instead of paying that amount in tax, you could have left it invested for ten years at an assumed 7% annual return:

€1,958 × (1.07)^10 ≈ €3,852

Nearly double. For doing nothing. The difference — roughly €1,894 — is what that single year’s tax bill costs you in foregone growth, purely through the effect of compounding. And this is just one year: for as long as you invest above the exemption, a comparable amount is added every year, on an ever-larger pool of wealth.

Rule of thumb at a 7% return: every euro of Box 3 tax you avoid paying is worth roughly €2 after 10 years, about €3.90 after 20 years, and about €7.60 after 30 years — the compounding multiplier doesn’t stack linearly.

Why this is hard to calculate by hand

To properly work out this effect over, say, 20 years, you’d need to account for each year separately: your wealth on 1 January of that year (the value on your DEGIRO annual statement, including any periodic contributions), the exemption and deemed return rate in force that year (which can change from year to year), and the fact that each year’s tax bill either keeps compounding or doesn’t, depending on whether you pay it out of the portfolio. Doing that by hand is error-prone — a difference of a few tens of euros in your assumptions compounds, over twenty years, into a difference of thousands in the end result.

Note: this worked example assumes the current notional-return system. Under the announced Wet werkelijk rendement (Actual Return Act), how this tax is calculated may change in the coming years — the compounding logic in this article still holds, but the yearly amounts won’t. Dividend tax withheld at source is a separate matter; see dividend tax on DEGIRO.

What a proper compounding simulation needs

A simulation that accounts for this fairly needs at least four adjustable inputs: your own (historical) return as the baseline instead of a generic assumption (see calculating your DEGIRO return), a periodic contribution that, as in real life, can vary monthly or yearly, an inflation assumption to judge the purchasing power of the end result, and the Dutch Box 3 tax burden, recalculated year after year on the wealth that applies at the time.

How ClearAnalyser calculates this for you

ClearAnalyser’s compounding simulator projects your future wealth growth based on your own historical CAGR, with an adjustable periodic contribution, inflation, and the Dutch Box 3 tax burden — recalculated automatically year after year, so you never have to run the same sum twenty times yourself. Which other trackers account for Box 3 is shown in the DEGIRO portfolio tracker comparison.

Sources: Belastingdienst — Box 3 (Dutch)