Budget Day 2022: new tax plans announced
On Budget Day (Prinsjesdag, 21 September 2022) the Dutch Cabinet presented the new tax plans. The outlines of much of the proposed legislation had already been announced in the Spring Memorandum earlier this year. However, recent developments have led to a number of changes to the previously announced measures, as well as postponement of certain expected measures, and the introduction of a number of new plans. What remains is a package of measures that will affect every taxpayer. Below, we have listed a number of the measures that are of particular relevance to an international audience.
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.
- Personal Income Tax in Box 1: income from work and own home
- Corporate Income Tax
- Employers & Employees
- Substantial shareholders
- Personal Income Tax in Box 3: income from savings and investments
- Business succession scheme (BOR)
- Real estate
- Climate measures
- Status of the plans
The Dutch Personal Income Tax rate for Box 1 (including social security premiums) for income up to and including € 73,031 will be lowered to 36.93%. In 2022 the rate was 37.07% for Box 1 income up to and including € 69,398.
A number of tax credits will change: the labour tax credit will increase in 2023, whereas the income-related combination tax credit (IACK) will be abolished altogether in 2025 (subject to transitional law).
The averaging scheme (middelingsregeling) for Personal Income Tax payers with significant fluctuations in annual income, is set to be abolished. The last time period over which averaging can be requested, is 2022-2023-2024.
The Dutch Corporate Income Tax rate will increase: the lower tax rate for profits up to and including € 200,000 will be 19% (2022: 15% on profits up to and including € 395,000). The higher tax rate on profits over € 200,000 remains 25.8%.
The maximum base for tax-free reimbursement under the 30%-ruling for extraterritorial employees will be capped at the amount of the Dutch WNT (2023: € 223,000). This means that the maximum tax-free reimbursement, based on the 2023 maximum, will be € 66,900. Transitional law will apply to employees who applied the 30%-ruling in the last wage period of 2022.
The statutory minimum wage is to be increased by 10.15% (scheduled increase of 2.1% and extra increase of 8.05%). The pensions under the old-age pensions act (AOW) will increase accordingly. Employers’ social security contributions will be altered slightly, but the overall levels will remain the same.
The first bracket of the discretionary margin of the Labour Cost Arrangement (WKR) is to be increased from 1.7% to 1.92% of the first € 400,000 of the total fiscal wages. The maximum tax-free reimbursement of travel expenses is to increase from € 0.19 per kilometer to € 0.21 in 2023 and € 0.22 in 2024. The working-from-home allowance will be indexed rather than increased. The exact amount will be published at the end of 2022, but is expected to be € 2.13 per day worked from home.
A substantial shareholder is, shortly put, any individual that directly or indirectly holds an interest of 5% or more in a Dutch company. Income from a substantial shareholding, such as dividends and capital gains on shares, is taxed in Box 2. The current Personal Income Tax rate in Box 2 is 26.9% on income from a substantial shareholding in The Netherlands. As of 2024, the tax rates will be 24.5% on the first € 67,000 of such income and 31% on the excess.
New legislation was recently approved by the Dutch House of Representatives, regarding excessive borrowing from a company by its shareholder(s). If approved by the Dutch Senate, in cases where the total amount of the loans from a substantial shareholding to its substantial shareholder (and their partner, as well as their direct relatives and their partners) exceeds € 700,000, the excess amount is considered a (notional) dividend and taxed accordingly. An exemption may apply for loans taken out in order to finance the shareholder’s owner-occupied home. The legislation is set to come into force as of 1 January 2023, with the first reference date being 31 December 2023. In principle, these new rules on excessive borrowing will also apply to expatriate substantial shareholders who have previously received a protective assessment. Please note that the taxation of this (notional) dividend in the case of foreign and expatriate substantial shareholders may depend on the application of tax treaties.
Substantial interest holders (and their partners) who work for their substantial shareholding, must receive wages befitting their work. The minimal wages for such director-major shareholders are determined based on the customary wage arrangement (gebruikelijkloonregeling). The efficiency margin (doelmatigheidsmarge) in the customary wage arrangement will be abolished. This may lead to an increase in the required wages for director-major shareholders. The current exception to the customary wage arrangement for director-major shareholders of innovative startups will also be abolished.
Recently, there have been significant developments regarding Box 3 taxation. In 2017, a new system was introduced, in which the total assets were assumed to follow a predetermined percentual categorisation into liquid assets and other assets, and these different types of assets were deemed to have a different (taxable) notional yield. This method was deemed unlawful by the Dutch Supreme Court in its ruling of 24 December 2021, and restoration of rights was offered to certain taxpayers with regard to Box 3 taxation in the period 2017-2022 based on a form of the notional savings variant mentioned below.
The Dutch Secretary of State for Finance expects to introduce a new Box 3 system in 2026, in which the actual yield (rather than a notional yield) will be taxed. Until then, bridging legislation will be in effect. Under this bridging legislation (referred to as the notional savings variant or forfaitaire spaarvariant), savings are deemed to yield a return of -0.01%, and other assets yield 5.53% (percentages for 2022). Certain liabilities may yield a (deductible) 2.46%. After taking into account a tax-free threshold, the remainder is subject to 31% Personal Income Tax (2022; to be increased in steps to 34% in 2025).
The future of the business succession scheme (bedrijfsopvolgingsregeling or BOR) has been a hot topic for some time now. The BOR facilitates business succession by offering certain exemptions and facilities for Personal Income Tax and Gift Tax. Following a report earlier this year, in which the scheme was concluded to be efficient but not effective, it was expected that the BOR would be limited, or even abolished, in this year’s Tax Plan. However, no concrete reference was made to the BOR on Budget Day. It is expected that the Dutch Cabinet will provide further insight into their views on the matter, later this year.
Early this year, a legislative proposal was submitted to the Dutch House of Representatives regarding the Landlord Levy. If this proposal comes into effect, the Landlord Levy for certain landlords with 50 or more rented houses, will be abolished. The regular tax rate for Real Estate Transfer Tax will be increased to 10.4% (2022: 8%). The lower rate of 2% remains in place for certain transfers of owner-occupied homes. The increased tax exemption for gifts concerning owner-occupied homes is to be phased out: it will be lowered to € 28,947 in 2023, and abolished altogether in 2024.
The vacant value ratio (leegwaarderatio), which may lower the taxable value of rented-out real estate for the purpose of Personal Income Tax, Gift Tax and Inheritance Tax, was set to be abolished but will now be indexed. Generally speaking, this will lead to a higher taxable value.
Although not included in the 2023 Tax Plan, it is worth noting that the VAT exemption for small businesses (kleineondernemersregeling or KOR) is set to be changed in the near future, as a result of the implementation of European rules. It is expected that it will be possible to apply the KOR in other European Union Member States from 1 January 2025 onwards. Certain thresholds will apply, and these may differ between Member States and sectors.
The 2023 Tax Plan includes several measures concerning sustainability and climate action. The budgets for the environmental investment deduction (MIA) and the energy investment deduction (EIA), which both offer a tax deduction for qualifying investments, are to be increased. Furthermore, sustainable production will be stimulated. The Carbon Tax for industrial businesses is to be made more robust as of 1 January 2023, and the Air Travel Tax is to be increased.
In this article, we have provided a brief overview of a number of upcoming fiscal proposals and changes in the Netherlands. A more detailed summary is available (in Dutch) at https://prinsjesdag.bakertilly.nl/.
Please note that most of the measures and proposals mentioned above are currently still being debated in the Dutch House of Representatives. There are also a number of 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 the potential impact of these measures on your tax position.