Tax Plan 2024 – The Netherlands: changes for the society and the tax system

oktober 24, 2023

The Dutch Tax Authorities introduced to the House of Representatives the Tax Plan 2024 package in September 2023. The new plan is currently under revision by the House of Representatives. The scope of this article is to introduce the changes and some of the new measures that can be found in the Tax Plan 2024.

The Tax Plan 2024 package is aiming to support purchasing power, combating poverty, improving and simplifying the tax system, as well as taking measures to achieve the promises for the climate goals.

As a first step, in order to contribute to purchasing power and reducing poverty, the government wants to prevent people with a low income to avoid financial burdens. Therefore, the government will structurally allocate funds to support this segment of people, and as a measure, the employment tax credit will be increased to 115 euros. Additionally, the reduction of the tax credit for young disabled individuals will be reversed, and the gradual phasing out of the double general tax credit for those on social assistance will be postponed until 2024. These measures are anticipated to result in higher net incomes for those living near the minimum income threshold.

The government has also chosen not to fully adjust the starting point for the highest income tax rate, the second and third brackets for retirees, in line with inflation but at a rate of 3.55%. Consequently, individuals with higher incomes will experience a slight increase in their income tax. Nevertheless, they will also see an improvement in their purchasing power for the upcoming year. The 1.6 billion euros generated from this initiative will be allocated to provide compensation for individuals with lower incomes.

Box 3 and Pillar 2:

Due to expected setbacks in the estimated revenue from the global minimum profit tax for multinational corporations at 15% (Pillar 2) and the postponement of the new box 3 system from 2026 to 2027, additional measures are required. This ensures the sustainability of public finances and prevents the burden from being transferred to future generations.

As part of these measures, it has been decided to reduce the SME profit exemption from 14% to 12.7%. This adjustment brings the tax burden of entrepreneurs closer to that of employees. Entrepreneurs with higher incomes will consequently pay taxes on a larger portion of their profits or income.

To compensate for the delay in implementing the new box 3 system, the tax-free allowance will not be indexed in 2024, remaining at €57,000. Typically, this allowance is annually adjusted for inflation. Furthermore, the tax rate in box 3 will be increased by an additional percentage point in 2024, moving from 32% to 34%.

 

Climate:

Given the significant climate challenges that are faced by the society, the government introduced a series of environmentally friendly measures in its climate package last spring. To meet the climate commitments, several agreements have been established, including the introduction of a CO2 tax for greenhouse horticulture from 2025 and the elimination of reduced energy tax rates for greenhouse horticulture. Moreover, the minimum CO2 price for the electricity sector and industry will rise to 51.70 euros per tonne of CO2 starting in 2024. The exemptions for energy and coal taxes for iron and building materials producers will be phased out.

To expedite the adoption of emission-free passenger vehicles and provide subsidies for second-hand electric cars, the fixed rate for car purchase tax will increase by 200 euros from 2025.

Furthermore, in an effort to further support small and medium enterprises (SME), enhancements to the SLIM Scheme (Incentive Scheme learning and development within SMEs) for Businesses have been addressed.

The SLIM scheme offers annual subsidies to Small and Medium-sized Enterprises (SMEs) as well as large companies in the agricultural, catering, and recreation sectors, encouraging them to promote learning and development within their organizations. Several changes have been introduced to enhance and clarify the scheme. These modifications are currently open for public consultation.

Increased Consultant Rate: The amendment scheme raises the maximum eligible hourly rate for external consultants from €125 to €135 per hour (excluding VAT). This adjustment aligns better with evolving economic conditions.

Verification of Wage Costs: Soon, applicants will be required to provide a payslip to verify the accuracy of the stated wage costs for internal hours, ensuring they are in line with prevailing market conditions.

Eligible Activities: The SLIM scheme covers a range of activities eligible for subsidies. To provide applicants with greater clarity, two activities have been further explained:

  • Learning Culture Scan: Organizations can now request a learning culture scan to identify their development needs and strengthen the educational working environment.
  • P&O Method: The term ‘method’ in the regulation will be adjusted to ‘P&O method’ to emphasize its focus on the learning and development of employees within the organization. Applicants for a SLIM subsidy are required to demonstrate how the L&D method contributes structurally to the learning culture in their company.

 

References

Rijksoverheid. (2023, October 17). Changes to SLIM regulation open for consultation. Retrieved from Bleastingdienst: https://www.rijksoverheid.nl/actueel/nieuws/2023/10/17/wijzigingen-slim-regeling-open-ter-consultatie

Rijksoverheid. (2023, September 19). Tax plan 2024: necessary steps for society and tax system. Retrieved from Belastingdienst: https://www.rijksoverheid.nl/onderwerpen/belasting-betalen/nieuws/2023/09/19/belastingplan-2024-noodzakelijke-stappen-voor-samenleving-en-belastingstelsel

 

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