Budget Day 2026: the new tax plans & proposed legislation in a nutshell

On Budget Day (Prinsjesdag, 15 September 2026) the Dutch Cabinet presented next year’s budget proposal and their new tax plans.

In this article, we list a number of measures that are of particular relevance to an international audience. We have included several points of attention stemming from previously approved legislation.

Please note: most of the topics mentioned below have yet to be discussed and approved by the Dutch House of Representatives and the Senate. The measures may therefore be subject to change. Be sure to discuss the consequences of the proposed legislation with your Baker Tilly tax advisor.

Measures for everyone

The tax rates and brackets in Box 1 (income from work and home) of the Dutch Personal Income Tax (PIT) are to be adjusted. In 2026, the tax & social premiums rates led to a combined tax rate of 35.75% for the box 1 income up to € 38,883. This will rise to 36.23% and € 39,247. Income between € 339,247 and € 78,426 is taxed at 37.56% in 2026, set to increase to 38.16% in 2027. The upper bracket limit will remain € 78.426 unchanged, as will the top-rate of 49.50%, applicable to income over this upper bracket limit.

The tax rate in the higher bracket of Box 2 (income from substantial shareholding) remains unchanged at 31%. The tax rate for the lower bracket remains 24.5%.

A number of tax credits and deductions are to be lowered or phased out, including the start-up deduction. The labour tax credit on the other hand will be increased, and the energy investment deduction (EIA) for energy-saving business assets will rise from 40% to 45.5% as of 1 January 2027.

Box 3 debate postponed

Box 3 (income from savings and investments) remains a hot topic. The current ‘dual system’ involves taxation based on a notional yield, unless the taxpayer demonstrates that the actual yield was lower, in which case the actual yield is taxed.

A new system was approved by the House of Representatives and awaits debate in the Senate, but this has been postponed several times. Further discussion is now scheduled for the Spring of 2027, with entry into force still hoped for per 2028. However, as the delays continue it is increasingly likely that the changes may be pushed to 2029 or later.

A motion was carried in the House of Representatives just before Budget Day, urging the Cabinet to introduce a capital gains tax for real estate as of 2028, even if the box 3 changes are pushed to 2029 or later. Additionally, carry-back of losses in Box 3 may be possible under circumstances, as of 2029. However, the future of Box 3 remains uncertain, and it remains to be seen what kind of system will be introduced, and when.

No changes to gift tax and inheritance tax

No significant changes to Dutch gift tax and inheritance tax were proposed, It is however noteworthy that non-arm’s length loans and so-called ‘paper gifts’ were previously included on the list of unusual tax constructions. These topics are likely to receive further scrutiny in the near future.

Businesses, entrepreneurs and director-major shareholders

The corporate income tax rate remains unchanged: 19% on the first € 200,000 of taxable profits and 25.8% on the excess.

With respect to loss relief, changes may also be expected following a recent court ruling concerning the treatment of latent losses after a change of control. At this stage, however, it is not yet clear what form these changes will take in practice.

A number of technical changes were proposed concerning among other matters the treatment of embedded foreign exchange results under the participation exemption, and the safe harbour and Side-by-Side rules under Pillar 2-legislation.

A few changes have been suggested that may affect director-major shareholders. For example, it has been proposed that in cases where a foreign company with a foreign shareholder becomes subject to Dutch taxation, the acquisition cost for the purposes of Dutch personal income tax is set at the fair market value.

We note that a previously announced adjustment to the Carried Interest Scheme (lucratiefbelangregeling) has been postponed until 2028. An expected overhaul of the rules for mutual funds was not included in this year’s plans.

Business merger and demerger relief regime

Corporate reorganisations such as a business merger or demerger can, subject to certain conditions, take place without triggering corporate income tax. One of the conditions is that the reorganisation must not be aimed at avoiding or deferring taxation.

Currently the burden of proof is on the taxpayer if shares in any of the entities involved are disposed of within three years of the reorganisation. This evidential presumption is to be abolished following a ruling by the Dutch Supreme Court earlier this year.

As a result, if shares are sold within three years, the burden of proof lies with the tax inspector. In such cases, the inspector will first have to provide prima facie evidence that the reorganisation was not based on valid business reasons, or that there are indications that the transaction was intended to avoid or defer taxation. This amendment is intended to take effect on 1 January 2027.

Adjusted VAT rates

The changes regarding VAT are relatively limited. It is noted that the lowered VAT rate for flowers and hot-air balloon flights will be abolished, so that these will be subject to 21% VAT as of 1 January 2028. Transitional rules may apply.

CBAM reporting and certificates

The Carbon Border Adjustment Mechanism (CBAM) is not a new development, but it remains highly relevant for certain importers of carbon-intensive goods produced outside of the European Union.

Importers that are within the scope of the CBAM regime will be required to submit their first annual CBAM declaration by September 2027. In preparation for this requirement, the sale of CBAM certificates will start on 1 February 2027.

Real estate and RETT

A reduced real estate transfer tax (RETT) rate is to be introduced for residential homes not occupied by their owner (e.g. rental houses and holiday homes). This follows prior adjustments last year. For these transactions, a rate of 7% will apply (instead of 8%).

An RETT-exemption is to be introduced for transfers between housing corporations. This is part of a larger package of measures aimed at housing corporations.  

Housing corporations will soon be exempted from the earnings stripping measures. This means they will no longer be subject to a restriction on the deductibility of interest. The details are to follow at the end of September.

Changes were expected regarding certain mutual funds or funds for joint account (fonds voor gemene rekening or ‘fgr’). The fgr is often used as a vehicle in real estate investments. However, no significant changes were included in the plans.

Transitional law for expats ending

As of 1 January 2026, a number of transitional arrangements relating to the Dutch expat regime (the 30%-ruling) for incoming expatriates ended. These transitional measures were part of earlier legislative changes that curtailed the scope of the regime.

From 31 December 2026, the last group of taxpayers covered by these transitional arrangements will no longer be able to opt for treatment as a partial non-resident taxpayer. As a result, they will generally become subject to Dutch taxation on their worldwide Box 2 and Box 3 income, unless relief from double taxation is offered.

In addition, the tax-free reimbursement percentage under the expat regime will be reduced from 30% to 27% as of 1 January 2027, and higher salary thresholds will apply.

Transitional rules remain applicable in certain cases. Employees who were already applying the expat regime in the final payroll period of 2023 may continue to benefit from transitional relief regarding the percentage of the tax-free allowance. Employees who applied the expat regime in the final payroll period of 2024 may be covered by transitional rules regarding the higher salary thresholds.

Our Global Mobility specialists would be pleased to provide further guidance on the practical implications of these changes.

Self-employed persons (ZZP): no final clarity

Whether a self-employed person without staff (‘ZZP’er’) is in fact a ZZP’er or an employee, is often debatable. This distinction is relevant for matters such as taxation, social security and labour law. Some minor developments took place this year, including the introduction of a presumption of evidence for hourly wages under round € 38. This is expected to enter into force in 2027. A new legislative proposal is expected to be presented shortly.

Despite developments and draft legislation, the position of ZZP’ers remains in flux. Speak to your Baker Tilly advisor if you require more information.

Various changes for employers

Several changes were proposed (or previously approved) for employers and employees. The Aof-levy for employers will be increased by 0.4% as part of the so-called ‘freedom contribution’. The discretionary margin in the first bracket of the work-related expenses scheme (WRCS or ‘WKR’) will increase from 2% to 2.16%.

The targeted exemption for employee discounts on industry-specific products is to be abolished as of 1 January 2027, discounts on industry-specific products will be treated as taxable employment income, unless a different targeted exemption applies. Subject to certain conditions, however, such discounts may still be accommodated within the discretionary margin of the WKR. If you offer employees these kinds of discounts, be sure to assess the consequences of this change. Our Employment Advisory experts would be happy to assist you.

Innovation

The Dutch corporate income tax system includes an optional regime known as the Innovation Box. Subject to certain conditions, income derived from self-developed intangible assets can be taxed at a reduced effective rate under this regime. The Innovation Box also contains a provision that makes it attractive for SMEs to use a simplified, lump-sum method for determining qualifying benefits (without the need for prior consultation with the Dutch Tax Authorities).

The government has proposed increasing this lump-sum threshold as of 1 January 2027, so that the maximum amount of innovative profit eligible for the favourable tax treatment will increase from € 25,000 to € 100,000.

Several measures were proposed to facilitate employee participations (e.g. share options) in innovative start-ups and scale-ups. Following an online consultation earlier this year, the draft legislation was presented on Budget day. Shortly put, these measures aim to facilitate the issuing of such shares without this leading to immediate taxation and cashflow problems.

Additionally, measures are discussed for a favourable treatment of these shares in Box 3, under the new (2028) method of taxation.

If you are interested in employee participations, please reach out to your tax advisor for more information.

EU Tax Omnibus

Earlier this year, the European Commission presented their Tax Omnibus package. In this proposal, the EC puts forward measures aimed at amending the tax framework within the European Union.

The Dutch government has indicated that it is generally positive about most of the proposals, while also raising several critical observations. The House of Representatives has explicitly stated that it wishes to remain actively involved in the process.

The debate continues

In this article, we have provided a brief overview of several upcoming tax proposals and changes in the Netherlands. A more detailed overview is available, in Dutch, here. 

Please note that most of the measures and proposals mentioned above are currently still being debated. The proposals have yet to be approved by the Dutch House of Representatives and the Senate. There are also measures on the table that we have not mentioned in this article. It is possible that the plans may be amended or even stricken off altogether, in the course of the parliamentary debate over the next several weeks.

Please be sure to seek professional advice before acting on any of the proposed measures. Our tax advisors would be happy to discuss any developments and the potential impact of these measures on your tax position.

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.