Yesterday, the House of Representatives passed the Tax Plan 2025 bill. This article briefly outlines a few changes that have been made to the plans.
VAT increase
The VAT increase set out in the Tax Plan will, for the most part, not go ahead. The reduced VAT rate will be abolished only for accommodation. For the other items, for which the Government had included the abolition of the reduced rate in the bill, an alternative is being sought. This means that the VAT rate on books, sport and culture will remain at 9%.
Earnings stripping
The defragmentation measure in the earnings stripping scheme under corporation tax will not go ahead. However, this does require the percentage included in the earnings stripping scheme (currently 20%) to be set slightly lower. This will now be 24.5% instead of 25%.
We describe the proposed amendment to these regulations in our article Earnings stripping in corporate tax.
Charitable Donation Deduction for Corporation Tax
The corporate tax (Vpb) deduction for charitable donations will not be abolished after all. This means that donations made by private limited companies (BVs) to ANBIs and SBBI support foundations will remain deductible up to a maximum of 50% of the BV’s profit (and up to €100,000).
The provision, which was rushed through the legislation at the last minute last year – and under which donations made by a private limited company (BV) on the basis of the personal considerations of its director/shareholder are not regarded as a distribution of profits – will be abolished again with effect from 1 January 2025. 2024 is set to be a good year in this regard!
The maximum amount of periodic donations that are deductible for income tax purposes is being increased from €250,000 per year to €1,500,000 per year.
More open space
The tax-free allowance under the work-related expenses scheme (WKR) is to be increased. For the first €400,000 of the wage bill, the discretionary allowance is currently 1.92%. This will rise to 2% with effect from 1 January 2025 and to 2.17% with effect from 1 January 2027.
As a result, the allowance under the WKR will be up to €320 higher in 2025 (0.08% * €400,000).
This expansion will be funded by reducing the incentives for green investments in 2025. From 2027 onwards, these incentives will be phased out completely.