Tax measures Coalition Agreement 2021 and Spring Budget Memorandum 2022
The Dutch Coalition Agreement 2021-2025 Omzien naar elkaar, vooruitkijken naar de toekomst (Looking out for each other, looking forward to the future) was published on 15 December 2021, including several proposals for tax measures. Since then, a different reality has arisen - particularly as a consequence of the war in Ukraine. On 20 May 2022 the government published the Spring Budget Memorandum 2022, in which various adjustments and new measures are proposed. Here you find an overview of the current state of affairs. The measures indicated with an * have been complemented based on the Spring Budget Memorandum 2022.
General
The cabinet has indicated in the Coalition Agreement that it wishes to simplify and reform the tax system. Specifically, the cabinet wants to take the first steps to abolish the benefits system (see for instance below under the heading Abolition of childcare benefits). Furthermore, the small and medium-sized enterprises receive special attention from the cabinet, as well as the income policy aimed at low and middle incomes. In the area of the (international) investment climate, the cabinet expresses its intention to ensure stable and predictable policies. As part of the environmental and climate policy the necessary steps will be taken to achieve the Fit for 55 goals, including an increase in the CO2 levy and the Energy Tax, but also the introduction and increase of subsidy budgets for making businesses more sustainable. These intentions have not changed substantially in the Spring Budget Memorandum 2022.
A number of key points that have frequently been discussed in the political debate since the conclusion of the Coalition Agreement are: additional expenditure on defence, the increase in the minimum wage and linking the state pension to the increase in the minimum wage, and the court ruling on Box 3, the loss of which is found 'by increasing the charges within the domain (particularly in Box 2 and Box 3)'. In the Spring Budget Memorandum 2022, this has resulted in a number of adjustments to the fiscal measures as originally presented in the Coalition Agreement and some new measures. The new measures relate, among other things, to mitigating the effects of the sharp increase in energy prices as a result of the war in Ukraine.
Furthermore, the Spring Budget Memorandum 2022 indicates that, in addition to the measures described below and in the run-up to Budget Day, the Cabinet will examine how the balance between taxes on capital and labour can be improved.
Income tax
Reduction self-employed individuals allowance; increase of labour levy rebate
The self-employed individuals allowance will be gradually reduced as of 2023 with 650 euros each year, up to 1.200 euros in 2030. According to the legislation already passed, the self-employed deduction will be reduced to EUR 6,310 in 2022. The intended reduction would eventually lead to a sum of 3,240 euros in 2036. However, the aim is now to achieve a faster and even further reduction. Self-employed individuals will however be compensated via an increase of the labour levy rebate.
Box 2: two brackets of 26 per cent and 29.5 per cent as of 2024*
The Spring Budget Memorandum announces the introduction of two brackets in Box 2 as of 2024. The first bracket will have a basic rate of 26 per cent for the first EUR 67,000 of income per person and the second bracket will have a rate of 29.5 per cent on the excess income.
Box 2: Efficiency margin usual wage regulation from 25 percent to 15 percent*
Based on the current efficiency margin, the usual wage regulation for the director and major shareholder (DGA) may be set 25 percent lower than the wage that is normal for the level and duration of the employment of the DGA. According to the Spring Budget Memorandum, this margin will be reduced to 15 per cent, as a result of which the director and major shareholder may have to set himself a higher usual wage and pay more tax in Box 1.
Box 3 (Saving and investment income)*
As of 2025, a new box 3 system based on real yields will be introduced. In anticipation of this, as of 2023, the vacancy value ratio for rental property will be abolished, as a result of which the taxation of the return on let property in box 3 will be more in line with reality. Based on the Coalition agreement, the exemption in box 3 would be increased to approximately 80,000 euros. This increase is retracted with the Spring Budget Memorandum. Under the new box 3 system as per 2025, regular benefits will be taxed, such as interest, dividends and rental income, as well as changes in value. The development of the value of real estate will initially still be taxed at a flat rate, but as soon as possible the transition will be made to an actual return. Especially in view of the Supreme Court ruling at the end of 2021, in which the Supreme Court declared the current box 3 levy to be in conflict with fundamental rights, the government wants to speed up the levy on actual returns.
Mortgage interest deduction
The current phase-out of mortgage interest deduction leads to a capping of the deduction at the basic rate of 37.05 per cent in 2023. This reduction will not be further accelerated.
Wage tax/Social Security
Increase of minimum wage*
A statutory minimum hourly wage will be introduced on the basis of a 36-hour working week. In addition, the statutory minimum wage will be increased gradually by 7.5 per cent. According to the Spring Budget Memorandum, this increase in the statutory minimum wage will start a year earlier and be implemented in three steps. The statutory minimum wage is increased by 2.5 percent in both 2023 and 2024 and by 2.32 percent in 2025. This leads to incidental higher expenditures in 2023 and 2024 for e.g. AOW, social assistance and Wajong.
Travel allowance*
Based on the Coalition Agreement, the untaxed travel allowance would be increased as of 1 January 2024. In the Spring Budget Memorandum, the increase is brought forward by one year and implemented as of 2023. For background and earlier communication, please read our previous Tax News item.
30% ruling limited to Balkenende standard*
Employees who come to the Netherlands from another country to work, can receive up to 30 per cent of their salary untaxed under the 30 per cent rule. As a result of the proposed measure in the Spring Budget Memorandum, the scheme will apply up to the norm of the Standards for Remuneration Act (2022: 216,000 euro). This new measure has a three-year phase-in period due to a transitional arrangement.
Supporting gender equality
Gender equality in the labour market is encouraged by extending paid parental leave to 70 per cent of the daily wage, combating pregnancy discrimination and improved monitoring of wage differences. Working more hours or days in the week and a proportional representation of women in leadership positions are also encouraged.
Self-employment
Further development of a web module can contribute to obtaining certainty in advance for self-employed persons about the nature of the employment relationship.Phantom self-employment is countered by improved public law enforcement in the case of the presumption of employee status.
Part-time unemployment compensation for more flexibility
The differences between permanent and flexible employment are being reduced. Temporary contracts are nowadays the standard for many people in the Netherlands, which leads to great uncertainty. Call-up, agency and temporary employment contracts will therefore be better regulated. In order to support companies to adopt a flexible and agile attitude, a budget-neutral part-time unemployment insurance scheme is being developed (as part of the Unemployment Act, in Dutch: “WW”).
Corporate income tax
Combating tax avoidance
This government will also continue to work to combat tax avoidance. The steps taken by the government in this area will largely stem from international cooperation. The Netherlands is therefore actively working together to find solutions in an international context, aimed at combating tax avoidance.
Digital services tax
A 'Digital Services Tax' (DST) is being introduced to tax the income generated from online advertising services, revenue or income from digital intermediary activities and the sale of data collected by users.
Minimum international rate for profit tax*
There will be a minimum rate for profit tax to prevent unfair competition between member states (OECD Pillar II). The revenue this will bring is still uncertain. OECD Pillar II, in short, concerns a minimum level of taxation of 15 per cent for multinational companies.
The introduction of OECD Pillar II has been postponed. Due to this postponement, income will be missed that had already been anticipated, which is why it was announced in the Spring Memorandum 2022 that the first corporate income tax bracket will be lowered.
Lowering of the corporate income tax bracket*
As of 2023, the bracket limit will be reduced from EUR 395,000 (bracket limit since 2022) to EUR 200,000. As a result, companies will pay the high corporate income tax rate of 25.8 percent sooner.
CFC measure
The 'Controlled Foreign Corporation' (CFC) measure from the advisory report of the Committee Ter Haar will be introduced. In 2020, the committee had proposed to make the CFC rule already in place more effective by also taxing the profits distributed by a CFC in the Netherlands going forward.
Climate and energy
General
The government has stated that the Netherlands wants to lead Europe in the fight against global warming. In order to be climate neutral by 2050 at the latest, the target in the Climate Act has been tightened to at least 55 per cent CO2 reduction by 2030. However, to ensure that this target is met, policies will be geared towards a higher reduction, namely 60 percent by 2030.
Increase of CO2 tax
In order to achieve the emission targets in the context of climate policy, the CO2 tax for industry is being tightened up by adjusting the number of dispensation rights and the rate. The CO2 levy functions as an additional charge on top of the price in the market for CO2 emission rights as it is formed in the EU ETS (Emission Trading System). On balance, this will create a minimum price for CO2 emissions for certain (energy-intensive) activities in the Netherlands.
Increase budget EIA and MIA/Vamil
The Energy investment deduction (EIA )EIA and Environmental investment deduction (MIA) and Random depreciation of environmental investments (Vamil) are tax investment facilities for qualifying investments in energy-efficient and environmentally friendly technologies. The budget for the EIA will be increased in eight steps of 50 million per year starting in 2023, with a total of 400 million in 2030. The budget for the MIA/Vamil will be increased in six steps of 30 million per year starting in 2025, with a total of 180 million in 2030.
Road pricing
By 2030, all new cars must be emission-free. In that year, all cars will be subjected to a system of payment according to use. The basis for that system is the motor vehicle tax, the rate of which will depend on the annual number of kilometres driven. It will not be time and place-linked and will replace toll roads.
Flight tax
The air ticket tax is going up and the proceeds will partly go towards making aviation more sustainable and reducing environmental impact.
Transfer tax
Transfer tax on non-residential properties*
The transfer tax for non-residential properties and on acquisitions of residential properties by legal entities and individuals who do not themselves intend to live in the residential properties for a long time was to be increased from 8 to 9 percent as of 2023 based on the coalition agreement. Under the Spring Budget Memorandum this rate will be increased to 10.1 per cent.
VAT
Small business scheme (KOR)*
On the basis of the Small Entrepreneurs Regulation Directive, the KOR will be adjusted as of 1 January 2025. The most important change is that an entrepreneur can also apply the KOR in other Member States, for example a Dutch entrepreneur in Belgium and a Belgian entrepreneur in the Netherlands.
Zero tax on fruit and vegetables
The cabinet considers the possibility of lowering the VAT on fruit and vegetables to 0 percent in time. This in order to stimulate a healthy lifestyle. This measure is being analysed in conjunction with the introduction of a sugar tax (please see below).
Sugar tax and tax on sugary drinks
It is being investigated how a sugar tax can be introduced in the long term. In the context of discouraging unhealthy eating, the cabinet wants to increase the tax on sugary drinks. The increase of the tax on soft drinks will take effect in 2023. Exempting mineral water will not be possible until 2024. To prevent beer from being subject to less excise duty than soft drinks, the minimum rate for beer will also be increased.
Expansion of the taxpayer group for the soft drinks tax*
At the moment, the group of taxpayers for the soft drinks tax ('consumption tax on non-alcoholic beverages') is limited to the person who has the non-alcoholic beverages on hand. Since tax evasion is increasingly occurring through purchases by private individuals and supply from abroad, this circle is extended to 'any other person involved in having the beverage available', which is in line with the current system of the Excise Duty Act.
Other
Abolition of landlord charge
The landlord charge will disappear in its entirety in 2023. The investment capacity that this creates must be used by housing corporations for the construction of flexible housing, affordable housing, renovation, sustainability and the quality of life in neighbourhoods.
In 2023, the budget will decrease by 470 million euro, in 2024 by 900 million euro, in 2025 by 1.42 billion euro and structurally by 1.710 billion euro.
Introduction of social B.V.
In the Coalition Agreement 2017- 2021, a promise was made to create "appropriate rules and more room for companies with social or societal goals". The current Coalition Agreement concretises this intention with the announcement of "the introduction of the Social B.V. (Maatschappelijke B.V. or BVm)". With this, the previously consulted BVm is expected to be introduced as a bill during this cabinet term - and possibly as early as next year. In addition, a clear framework of reporting requirements for social entrepreneurship is announced, as well as a modified proposal for sustainability initiatives which will make an exception to the Competition Act possible. Tax facilities could also be developed for a BVm, since such a company primarily aims to have a generally beneficial impact on society. It is expected that this could be a follow-up step after the BVm enters into force. The Spring Budget Memorandum contains no changes in this respect, so it may be assumed that the introduction of BVm is still in full swing.
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