Dutch Tax Changes
Changes in personal income taxation
As from 2019, the income tax brackets will be reduced to two from the current four. The income of up to EUR 68.000 per year will be subject to the tax rate of 37%. A 49,5% tax rate will apply to the income above EUR 68.000. It is calculated that the changes in the personal income taxation will cut tax bills by EUR 1.200 per year for those who earn EUR 40.000 and less annually. Middle and high-earning people will benefit most from this amendment.
Cutting tax brakes for expats
The period of the Dutch tax brake for expats, also known as the 30% ruling, will be cut from the current 8 years to 5 years. The 30% ruling allows international workers not to pay tax on 30% of their salary. At present, the incentive effectively applies to around 60.000 expats working in the Netherlands. In order to opt for the tax brake, the workers need to earn at least EUR 54.000 annually. Furthermore, the ruling is applicable only to expats who lived at least two thirds of the 24 months prior to the start of their employment at least 150 km from the Dutch border.
Cutting asset tax
In the Netherlands, the asset tax of 4% is payable on savings, shares, art, and second homes. The new government plans to increase the tax-free limit for such assets from the current EUR 25.000 to EUR 30.000 and decrease the effective tax rate.
The reduced VAT rate, which applies to books, food and entertainment, will be increased from 6% to 9%.
The new government plans to introduce changes in the corporate tax regime in order to attract more investors to the Netherlands. First, the dividend withholding tax will be abolished, with an exception of dividend payments to low tax jurisdictions and cases where abusive circumstances are detected. Second, the corporate profit tax will be reduced gradually in 2019-2021. At present, companies pay 25% on net income of less than EUR 200.000. Corporate profits above EUR 200.000 are taxable at a reduced rate of 20%. In 2019, the corporate income tax will be reduced to 24% and 19%, in 2020 – 22,5% and 17,5%, and in 2020 – 21% and 16%.
The taxation policy of the new coalition also includes some changes in deductibility of interest, such as (1) introducing earnings stripping rule (i.e., the deductibility of interest is limited to 30% of taxpayer’s earnings before interest, taxes, depreciation, and amortization), (2) enacting thin capitalization rule for banks and insurance companies (i.e., preventing such institutions from deducting interest if their debt is greater than 92% of the commercial balance sheet total), and (3) abolishing some of the present interest deduction limitations.
The coalition aims to introduce a new road freight traffic tax and the tax on energy and tobacco products will increase.