Top 10 proposals and changes in the 2021 Tax Plan

On September 15, Budget Day, the 2021 Tax Plan was presented. The ten most important proposals and changes are listed below.

1. Introduction of transfer-tax exemption for first-time buyers

To make the housing market more accessible for first-time house owners, 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.

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 exemption and rate for box 3 to be raised

From January 1st, 2021 the tax exemption for private individuals on income from savings and investments 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. (30% 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 bracket (taxable income up to and including €68,507) will be reduced from 37.35% to 37.10%. From 2022 to 2024 the government will further decrease this rate to 37.03%. The rate of income tax in the second bracket (taxable income exceeding €68,507) will remain at 49.5%.

4. Reduction in self-employed person’s allowance

To reduce the difference in the tax burden borne by 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 corporate income tax tax to be adjusted

The lower corporate income tax rate will be 15% (16.5% in 2020). 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 corporate income tax will stay 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 (benefit in kind). With effect from 1 January 2021 the addition to taxable income for the private use of electric cars will be 12% (8% in 2020) on a maximum of €40,000 (€45,000 in 2020). 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 this 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

The COVID-19 has a great impact on the employment market. 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 tax free.

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

Fairer taxation of multinationals is on the agenda of the Dutch government. The following measures have been announced in light of fairer taxation of multinationals.

  • Losses may be set off against pass and future profits. In the 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 given year.
  • Informal capital structures will 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 explore a more equal tax treatment of debt and equity.