Dutch Minister of Finance Wopke Hoekstra presented the 2021 Budget Memorandum and the 2021 Tax Plan on the 15th of September. What proposals and changes in the area of taxation did he introduce? The measures have been influenced greatly by the coronavirus crisis. A brief explanation of the ten most important proposals and changes is provided below.
1. Introduction of transfer-tax exemption for first-time buyers
To make it easier for first-time buyers to access the housing market, an exemption from transfer tax will be introduced from 1 January 2021. This exemption will apply to buyers aged between 18 and 35 who are purchasing their own home. If the buyer has already benefited from the transfer-tax exemption or is 35 years of age or older, the current rate of 2% will apply to the purchase.
The rate of transfer tax applicable to property purchased by investors and legal entities, as well as to homes that are not used as a main residence, will increase to 8% (6% in 2020).
2. Tax allowance and rate for box 3 to be raised
From 1 January 2021 the tax allowance will be increased to € 50,000 per taxpayer. This means savers and small investors with assets of up to € 50,000 (or € 100,000 if they have a tax partner) will no longer pay tax on these assets. Anyone with assets of € 50,000 or more in 2021 will pay 31% tax on the income from these assets from 2021 onwards. A rate of 30% currently applies in 2020.
Please note the asset threshold used to determine whether a person is entitled to allowances will be € 31,430!
3. Reduction in income tax
In 2021 the rate of income tax in the first band (taxable income up to and including € 68,507) will be reduced from 37.35% to 37.10%. From 2022 to 2024 the government will lower this rate further to 37.03%. The rate of income tax in the second band (taxable income from € 68,507) will remain at 49.5%.
4. Reduction in self-employed person’s allowance
To reduce the difference in the tax burden between employees and self-employed people, the self-employed person’s allowance will be cut at a faster rate. It will ultimately reach a level of € 3,240 in 2036. The maximum self-employed person’s allowance for 2021 will be € 6,670.
An increase in the employed person’s tax credit from € 3,819 to € 4,205 in 2021 and the cutting of the basic rate of income tax to 37.10% will compensate entrepreneurs for this reduction in the self-employed person’s allowance.
5. Rate of corporation tax to be adjusted
The lower rate of corporation tax will be cut from 16.5% to 15%. With effect from 2021 this lower rate will apply to profits of up to € 245,000 instead of € 200,000. This threshold will be raised further to € 395,000 in 2022. The higher rate of corporation tax will remain at 25%.
6. Fixed budget under work-related expenses scheme to be restricted again
One of the coronavirus support measures that has been introduced is an increase in the fixed budget under the work-related expenses scheme from 1.7% to 3% on the first € 400,000 of the taxable wage bill. This will apply in 2020 only.
From 1 January 2021 the calculation of the fixed budget will be restricted again: up to a taxable wage bill of € 400,000 a rate of 1.7% will apply, with a rate of 1.18% (2020: 1.2%) applicable above € 400,000.
7. Increase in addition to taxable income for electric car
Last year it was announced that the addition to taxable income for the private use of electric cars would be increased incrementally. With effect from 1 January 2021 the addition to taxable income for the private use of electric cars will be 12% (2020: 8%) on a maximum of € 40,000 (2020: € 45,000). Is the list price more than € 40,000? In that case the normal addition of 22% will apply on the amount above this figure.
Over the coming years the addition will be increased further, rising to 16% in 2022 and 17% in 2025. The maximum list price up to which the lower addition is applicable will not be raised and will remain at € 40,000. One new regulation being introduced from 1 January 2021 is that the maximum list price will not apply to solar cars powered by integrated solar panels. The government’s intention here is to anticipate developments on the automotive market.
8. (Re)training to be made more accessible
It is possible that jobs will be lost as a result of the coronavirus crisis. The government is keen to give anyone who finds themselves in this position greater opportunities to retrain. From 2021 employers will therefore also be able to reimburse the training costs of former employees free of tax.
9. Introduction of job-related investment tax credit (BIK)
The details of the scheme are yet to be worked out, but to stimulate investment a new investment tax credit will be introduced, which entrepreneurs can offset against their payroll taxes.
10. Fairer taxation of multinationals
At present, many companies generate profits in the Netherlands, but do not pay any tax, as a result of offsetting losses or certain deductible items. The following measures have been announced to prevent this:
- In future it will be possible to offset a loss without any time limit, although such offsetting will be limited to € 1,000,000 of the taxable profit. If a higher profit is posted, losses can only be offset against up to 50% of the taxable profit above € 1,000,000 in any one year.
- Informal capital structures will also be tackled from 1 January 2022.
- The deduction of liquidation and discontinuation losses in the Netherlands upon termination of business activities abroad will be restricted.
- A study will be conducted to look into the more equal tax treatment of debt and equity.