The Senate has approved the bills containing the 2020 Tax Plans. Following this, the Ministry of Finance has published the overview Key changes to taxation for 2020 published (this overview is also known as the end-of-year press release).
Not exactly thrilling
It comes as no surprise that the bills have been passed by Parliament. And we have already pointed out that the proposals are not all that exciting.
In our article Our hearts beat with anticipation It states that the (final) legislative proposals concerning the current account measure and the changes to Box 3 will not be published until 2020.
Rates and exemptions
The end-of-year press release contains a handy overview of most of the rates, exemptions, standard amounts, thresholds and so on applicable for 2020. Where these are index-linked, the so-called table adjustment factor of 1.016 has been applied. The amount applicable for 2019, multiplied by 1.016 (rounded off), gives the amount applicable for 2020.
A two-band tax rate is being introduced for income tax in Box 1. Income from employment and property (i.e. Box 1) up to €68,507 is taxed at a rate of 37.35%, and the amount above that at 49.5%. For those receiving the state pension (AOW), the first tax bracket will be split in two. Income up to €34,712 will be taxed at 19.45%, and income up to €68,507 will be taxed at 37.35%.
The rate at which tax-deductible items in Box 1 may be claimed is capped at 46% in 2020. Tax-deductible items include interest on a owner-occupied home, gifts, maintenance payments and the business expense allowance.
The rate in Box 2 (income from a substantial interest) will be increased from 25% in 2019 to 26.25% in 2020 (in 2021, this rate will be 26.9%). The rate in box 3 (income from savings and investments) remains at 30%. The tax-free allowance in box 3 will be increased from €30,360 to €30,846 (per tax partner).
Donate
A common tax-related question around the turn of the year is: “How much can I gift to my children?”. The answer is, of course: as much as you like, but the (standard) tax-free allowance for 2020 is: € 5.515 (2019: €5,428). For the other thresholds, please refer to our updated factsheet Gift tax exemptions.
And, of course, our end-of-year tips still available.