On 17 September 2024, several tax bills were submitted to the House of Representatives. Below is a selection of some of the tax proposals.
Please note that the legislative proposals are subject to change.
- Reversal of increase in box 2 rate
- Business succession
- Partial reversal of cutbacks in the 30% ruling and increase in salary standard
- Specific exemption for public transport subscriptions (wage tax)
- Deduction of gifts for corporate income tax purposes no longer applicable
- Revision of VAT deduction for services to immovable property
- Removal of reduced VAT rate for multiple items
- Preventing double counting in the event of excessive borrowing in joint ventures
- Adjustment of liquidation loss scheme (corporate income tax)
- Generic interest deduction limitation (corporate income tax)
- Increase in gambling tax
- Retention of the buy-back facility in the dividend withholding tax
- Termination of net metering supply (energy)
- Retirement provisions
- Exception to key agreement as acquisition of economic ownership
- Extension of the first-time buyers exemption and reduced rate of real estate transfer tax
Reversal of increase in box 2 rate
The proposal is to reduce the income tax rate in box 2 from 33% to 31% starting in 2025. (In 2024, it was increased from 31% to 33%).
Business succession
In the case of business successions, the following can be used under certain conditions:
- The carry-over scheme for a substantial interest holder for income tax purpose (DSR); and
- The business succession regulation for gift and inheritance tax (BOR).
In the tax plans submitted last year, eight changes were introduced, seven of which will only take effect on January 1, 2025. These include the disqualification of rented real estate for the BOR and DSR, the removal of the employment requirement for the DSR, and the introduction of a minimum age requirement of 21 years for the transferee in both the BOR and DSR in the case of a gift.
In this year’s tax plans, six changes are proposed, the most significant being:
- Access to the BOR and the DSR will be restricted to ordinary shares, with a minimum of 5% of the issued capital. For instance, tracking stocks will be excluded from both the BOR and DSR;
- Relaxation of the possession and continuation requirements in the BOR. Among other changes, the continuation period will be reduced from five to three years. Additionally, in case of restructuring, the possession requirement (with the donor) or the continuation requirement will be satisfied more easily; and
- Addressing the unintentional use of the BOR in cases of (very) old age. For testators and donors who start a business more than two years after reaching state pension age, the possession period will gradually increase to qualify for the BOR.
Partial reversal of cutbacks in the 30% ruling and increase in salary standard
The Memorandum of Amendment to the 2025 Tax Plan bill states that the restrictions on the 30% ruling introduced in the 2024 Tax Plan (“30-20-10 rule”) will be largely reversed. Starting on 1 January 2027, the maximum tax-free allowance will be set at a constant lump sum of 27%. For the years 2025 and 2026, a 30% tax-free allowance will apply to all incoming employees. Additionally, the salary standard will increase as follows:
- From € 46,107 to € 50,436 (2024 prices) for regular incoming employees; and
- From € 35,048 to € 38,338 (2024 prices) for incoming employees under 30 years old with a mater’s degree.
indexed salary standards until the end of their term.
These adjustments align with the Geerdink-Moonen motion, which urges the government to propose changes to the 30% ruling that are less harmful to the economy.
Specific exemption for public transport subscriptions (wage tax)
The proposed amendment clarifies that if an employer can reasonably demonstrate some business use of the right to free travel or discounted travel, they will no longer need to keep records of the private and business use to qualify for the targeted exemption.
Additionally, it is proposed to eliminate the distinction in the current regulation between travel on Dutch public transport and travel on other forms of public transport.
Deduction of gifts for corporate income tax purposes no longer applicable
The gift deduction for corporate income tax purposes will be discontinued, effective for financial years starting on or after 1 January 2025. Supporting charities through sponsorship or advertising, and costs related to Corporate Social Responsibility will remain deductible as business expenses.
Gifts made for shareholder-related reasons could previously qualify for the gift deduction, but this possibility will no longer apply. These gifts will be considered income in box 2 for the substantial interest holder. The gift deduction for income tax purposes will remain unchanged.
Revision of VAT deduction for services to immovable property
The Value added Tax Act 1968 includes a provision for the revision of value added tax (VAT) deductions in cases where the use of an investment asset changes. This revision scheme applies to immovable property, rights to immovable property, and movable property that is or can be depreciated.
As of 1 January 2026, the scheme will be expanded to include services that possess the characteristics of investment goods. This expansion means that these services will be monitored over several years, and the initially deducted VAT will be adjusted to reflect the actual use of the asset for taxable or exempt activities during that period. For now, the revision period (per service) is set to an effective period of five financial years.
To prevent small investment services from falling under the measure, a threshold of € 30,000 per investment service related to immovable property will be introduced.
Removal of reduced VAT rate for multiple items
Accommodation
It is proposed to abolish the reduced VAT rate for the provision of accommodation within the framework of the hotel, boarding and holiday business to persons who only stay there for a short period (hereinafter: accommodation) and for certain cultural goods and services, books and sports, with effect from the year 2026. There will be a transitional arrangement.
As a result, the VAT rate for accommodation will go from the reduced rate (currently 9%) to the general rate (now 21%). With the abolition of this item, the application of the reduced rate is therefore no longer possible, for example, for the rental of hotel rooms, furnished holiday homes or mobile homes. The short-term provision of accommodation to, for example, employees, students, asylum seekers and homeless people will also fall under the general rate.
It should be noted that the reduced rate of VAT for the provision of camping facilities within the framework of the camping and holiday activities business to persons who only stay there for a short period (hereinafter: camping) will continue to exist.
Cultural goods and services
The current reduced VAT rate for cultural goods and services will be largely abolished. The general rate will also apply to these goods and services as of 1 January 2026 (with the exception of granting access to amusement parks, play and ornamental gardens, and other such primary and permanent facilities for entertainment and day recreation, circuses, zoos and cinemas).
Preventing double counting in the event of excessive borrowing in joint ventures
The law on excessive borrowing from one’s own company entered into force on 1 January 2023 and, in short, regulates that in the event that a substantial interest holder borrows more than € 500,000 (maximum amount) from its own company, the excess part will be taxed as a deemed regular benefit in box 2. In the case of loans granted by, for example, a private limited company to a partnership – a general partnership, or a limited partnership – double counting may arise if one or more participants also have a substantial interest in this private limited company.
Adjustment of liquidation loss scheme (corporate income tax)
Based on the participation exemption, the profit received by a Dutch taxable parent company by means of a distribution by a domestic or foreign subsidiary (as well as other benefits from a participation) is exempted under certain conditions. This means that profits, like dividends and capital gains, are not taxed, but at the same time, any losses cannot be deducted either. amount sacrificed by the taxpayer for the participation and the liquidation payment) is in principle deductible.
The government proposes to amend the liquidation loss scheme in two respects:
- The first proposed amendment concerns the calculation of the amount sacrificed for the participating interest, which is necessary to determine the liquidation loss to be considered. The effect of the proposed amendment is that, when calculating the amount sacrificed by a taxpayer for a participation, account is also taken of a write-down of a claim on that participation taken back by that taxpayer in favor of the taxable profit, without an amount equal to the write-down being added to the so-called valuation reserve. This is the case if certain tainted legal transactions occur, for example if the participation pays its debt (which corresponds to the taxpayer’s claim) by, for example, issuing shares or if the taxpayer relinquishes its claim; and
- The second proposed amendment relates to the so-called intermediate holding provision in the liquidation loss scheme.
In practice, it has become apparent that, contrary to the purpose and purpose of the liquidation loss scheme, it is possible in certain situations to convert a in principle non-deductible loss on sales of an indirectly held participation into a deductible liquidation loss on an immediately held participation. That is now being changed.
Generic interest deduction limitation (corporate income tax)
With the 2022 Tax Plan, the earnings stripping measure in the corporate income tax has been tightened by reducing the percentage of the adjusted profit used to determine the deduction margin in the generic interest deduction limitation from 30% to 20%. The government proposes to partially reverse this tightening by increasing the percentage to 25%, so that this percentage is more in line with the European average.
Increase in gambling tax
The government has decided to gradually increase the rate of gambling tax from 30.5% to 37.8%. As of January 1, 2025, the rate will increase to 34.2% and then to 37.8% as of January 1, 2026.
Retention of the buy-back facility in the dividend withholding tax
In the Netherlands, the repurchase of shares is, in principle, subject to dividend withholding tax. Based on the dividend withholding tax repurchase facility, a share buyback by a listed company is exempt from dividend withholding tax under certain conditions. This buy-back facility was introduced so that the repurchase of shares by Dutch listed companies would not be treated less favorably from a tax perspective compared to the repurchase of shares by foreign competitors.the Dutch business climate, the government wishes to retain the dividend withholding tax repurchase facility. This bill therefore stipulates that the abolition of the purchasing facility, which is scheduled to take effect on 1 January 2025, will not take place.
Termination of net metering supply (energy)
It is proposed to end the net metering scheme for electricity as of 2027. In large parts of the Netherlands, the electricity grid is already so full that large-scale consumers there will not be able to get new or heavier connections in the coming years without additional measures. According to the government, by ending the net metering scheme, it pays off financially for active customers to use self-generated renewable electricity efficiently and to consume it themselves as much as possible at the same time (consumption ‘behind the meter’) instead of feeding it into the system
Retirement provisions
Amendments include:
- No revision interest on surrender of an annuity on the untaxed part;
- Preventing box splitting of old annuities as a result of the Supreme Court rulings from 2018;
- Legatee as beneficiary in the annuity account, the annuity investment right and the retirement obligation;
- Net annuities: It is proposed to include that in the event of an irregular transaction, the tax consequences apply only to the part of the net annuity in which there is an irregular transaction; and
- Preventing tax deferral in the event of non-regular settlement of self-administered pension or salary entitlement or retirement obligation.
Exception to key agreement as acquisition of beneficial ownership
Since 1995, the acquisition of immovable property situated in the Netherlands or of rights to which it is subject (hereinafter referred to as ‘immovable property’) includes the acquisition of economic ownership. A situation in which there may be an acquisition of the economic ownership of immovable property is when entering into a key agreement. This is an agreement in which a purchaser of a home receives certain permission(s) (the key) from a transferor of a home in anticipation of the legal acquisition of ownership of the home. Depending on the nature and content of the agreement, this agreement may lead to the acquisition of economic ownership.
The government considers it undesirable that people may be confronted with the administrative and financial consequences of an economic acquisition of ownership by concluding a key agreement in anticipation of the legal acquisition of ownership.
Extension of the first-time buyer’s exemption and reduced rate of real estate transfer tax
Since the entry into force of the Transfer Tax Differentiation Act on 1 January 2021, the acquisition of the economic ownership of a home has been excluded from the application of the reduced rate and the first-time buyer’s exemption.
This means that the acquisition of the economic ownership of a home may be eligible for the reduced rate or the first-time buyer’s exemption, provided that all other legal conditions for the application of the reduced rate or the first-time buyer’s exemption are met. The purpose of this is to treat these acquirers in the same way for the purposes of the real estate transfer tax rate as acquirers who acquire full ownership of the home in one go.
The amendment also means that natural persons who only acquire the economic ownership (whether or not partially) of the home they live in or will occupy themselves can apply the reduced rate or the first-time buyer’s exemption.
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If you have any questions about these bills, please contact one of our tax advisors.
