Prince’s Day 2023 | Budget Day 2023
Prinsjesdag 2023 – which happens on the third Tuesday of September – has already occurred. On this day in 2023, Minister Kaag of Finance presented the Dutch House of Representatives with the Budget Memorandum and State Budget for 2024. They also introduced the Tax Plan for 2024.
The Tax Plan for 2024 has been revealed but still needs approval from the Dutch Senate (Eerste Kamer) and the House of Representatives (Tweede Kamer) before it can become law on January 1, 2024. Let’s discuss some of the possible changes that might affect your finances.
Salaries are expected to go up by about 5.4%, while the cost of living is predicted to increase by 3.6%. This means that, on average, people can expect their real income to rise by approximately 1.8% after considering inflation.
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Do you have any questions about the plans announced on Prinsjesdag 2023? Or would you like to speak with a tax advisor? Contact us today by filling out the contact form or call us at +31 20-2170120 to schedule a consultation. We look forward to hearing from you and helping you achieve your tax goals.
Income tax bracket (box 1):
People who work will start paying a higher tax rate on their earnings sooner. If you earn more than €75,625, you’ll be taxed at a rate of 49.5%. Without these changes, you would only reach this higher tax bracket if you earned over €80,263. Retired individuals will also pay more taxes. If you were born before 1946 and earn €40,078, you’ll be taxed at a rate of 36.97%. If you were born after 1946 and earn €38,140, the tax rate will also be 36.97%. However, there’s some good news for working individuals – the employment tax credit will increase by €115, providing a tax benefit.
Wealth tax (box 3):
You’ll have to pay a higher tax rate on your savings and investments (box 3 income), which will go up from 32% to 34% in 2024. However, the tax-free threshold, which is the amount you can earn without paying taxes, will remain at €57,000 in 2024 (€114,000 for couples filing taxes together).
Options to improve box 3:
The government plans to reclassify some assets, like membership rights in a homeowners’ association (VvE) and funds held in a third-party account managed by a notary or bailiff, as bank deposits. Currently, these assets are categorized as “other assets” and are taxed at a flat rate of 6.17% in 2023. However, these assets typically consist of money kept in a bank account. So, by applying the flat rate for bank deposits, which is 0.36% in 2023, the government aims to provide a more accurate reflection of the return on these assets. Therefore, they propose reclassifying these assets under the “bank deposits” category.
Additionally, the government suggests making claims and debts between family members (like parents and minor children) tax-exempt in box 3. This means you won’t have to report these claims and debts in your tax return.
Increase in Tax-Free travel allowance:
The government plans to increase the maximum untaxed amount for business travel to 23 cents per kilometer starting from January 1, 2024, as agreed in the coalition agreement. This change will apply to employees subject to payroll tax, and it’s also proposed for individual entrepreneurs and result beneficiaries when using their private vehicles for business purposes.
Reducing the SME profit exemption:
The proposal is to decrease the SME profit exemption from 14% to 12.7%. The SME profit exemption reduces the taxable profits for small and medium-sized enterprises (SMEs). There’s also a proposal to reduce the deduction percentage for energy investment allowance, environmental investment allowance, and arbitrary depreciation of environmental assets from 45.5% to 40%.
Do you have any questions about the plans announced on Prince’s Day 2023, Budget Day 2023? Or would you like to speak with a tax advisor? We’re here to assist you! Please get in touch with us using the contact information below.
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