Prinsjesdag – what does it mean for taxpayers?

What are we expecting?

• Reduction for boxes 2 and 3

Individuals pay taxes in bracket 2 if they have income from share ownership of over 5% and in box 3 if they own savings and investments, including shares less than 5%. If there is a phasing out of the general tax credit, this will also affect the net tax in boxes 2 and 3.

• Increase of rate for box 1 + lower starting point

Most tax-paying residents of the Netherlands belong to box 1, which includes incomes from employment, freelance income, and primary residence. With the expected lowering of the threshold for the highest tax bracket you will pay the higher tax rate a little bit earlier than before.

• Reduction of SME profit exemption

The SME profit exemption (in Dutch – MKB) means a reduction of your taxable profit, the higher the profit exemption – the less income taxes you pay. Currently, it is set at 13.31%, and it is expected to go down to 12.03% or 12.7%.

• Limitation regarding gift deductions

Individuals and companies can use a certain percentage of their budget on gifts and this can come with a tax benefit. For individuals, the plan is to reduce this benefit and for companies (B.V.’s) the plan is to stop the tax benefits related to gifts completely.

• The green investment exemption in box 3 is to be reduced

Investing in a Green Fund yields a lower return, however, you do get a tax benefit. Because your return on these investments is lower, the green funds can lend money to you at a lower rate as well. If the government lowers the exemption for green investments, the investors will relatively have to pay higher taxes if the value exceeds the exemption amount.

• The introduction to the right to levy tax for work-from-home

Based on the announced amendment protocol to the Netherlands-Germany tax treaty, the question was raised whether the employees who reside in one country and work for a company in another shall be taxed in both countries, especially considering the rise of work-from-home. The introduction of the right to levy tax on work-from-home could mean that employees will only be taxed by the country of residence.

• Adjustments to extraterritorial tax-free percentages, including 30% ruling

International employees coming to work in the Netherlands usually receive reimbursement of costs or tax-free opportunities. The plan is to reverse the impactful changes regarding the 30% ruling announced last year but to introduce a reduction on the 30% ruling benefit.

• Reduction for transfer tax for second home

In the Netherlands, you pay property transfer tax when you obtain real estate property. The transfer tax for the primary residence home can be 0% or 2%. However, for the second home (holiday home, investment property) the transfer tax is set at 10.4%. With the new changes in the national budget, a transfer tax reduction for a second property is expected.