The Ministry of Finance has overview published the key changes to taxation for 2018.
Tax Plans for 2018
The bills setting out the tax plans for 2018 were passed by the Senate just before the Christmas recess. We outlined these proposals in our article Tax Plans for 2018.
In the House of Representatives, the new rules on inheritance and gift tax relating to marriage had already been removed from the plans following the adoption of a motion. Instead, we are awaiting approval from State Secretary Snel to confirm that a 50/50 division will never result in inheritance or gift tax being levied.
Do not confuse the measures in the 2018 tax plans with the plans set out in the Rutte III’s coalition agreement. The coalition agreement is still to be translated into draft legislation in 2018 (and in subsequent years).
Income from savings and investments (Box 3)
The most significant changes to income tax relate to Box 3. The tax-free allowance has been increased from €25,000 to €30,000 per taxpayer (for tax partners, the tax-free allowance is therefore €60,000). This increase has implications for rental and healthcare allowance.
In addition, the flat-rate return will be reduced slightly. For assets of up to €70,800 in Box 3 (above the tax-free allowance), the flat-rate return is 2.02%. The tax (30%) therefore amounts to 0.6% of the assets. This is still considerably higher than the interest rate on a savings account. If you compare the tax against an interest rate of 0.1%, the rate works out at 600%.
Even for the portion of assets exceeding €978,000, the flat-rate return decreases: from 5.39% to 5.38%.
It is still possible to avoid Box 3 taxation via a private limited company, an open-ended mutual fund or an open-ended limited partnership. But you must do so before the end of the year have arranged.
Own home
The most talked-about change concerns the abolition of the Hillen allowance. However, this will not come into effect until 2019. For 2018, the additional tax liability percentages for owner-occupied homes have been reduced slightly:
| WOZ value | Addition | ||
| more than | but no more than | 2018 | 2017 |
| - | € 12.500 | nothing | nothing |
| € 12.500 | € 25.000 | 0,25% | 0,30% |
| € 25.000 | € 50.000 | 0,40% | 0,45% |
| € 50.000 | € 750.000 | 0,55% | 0,60% |
| € 75.000 | € 1.060.000 | 0,70% | 0,75% |
| € 1.060.000 | - | 2,35% | 2,35% |
For properties with a WOZ value exceeding €1,060,000, the additional tax liability of 2.35% applies to the value in excess of €1,060,000.
If you claim the mortgage interest deduction on your own home in the highest tax bracket, a further 0.5% percentage point will be deducted from that in 2018. You will claim the deduction in 2018 at a rate of 49.5% (compared with 50% in 2017). Following the introduction of the measures provided for in the coalition agreement, flat-rate tax this will be phased out more quickly to the low rate of that flat-rate tax (36.93%).
Gift tax rates and exemptions
The exemptions from gift tax have been adjusted for inflation. This results in slightly higher figures:
| 2018 | 2017 | |
| Children | € 5.363 | € 5.320 |
| Other acquirers | € 2.147 | € 2.129 |
Children aged between 18 and 40 are entitled to a one-off gift tax-free allowance of €5,363 € 25.731 (2017: €25,526) may be donated. If the donation is used to fund an expensive course of study, the exemption amounts to € 53.602 (2017: € 53.176).
If the gift is used for the donee’s own home, the following may be gifted tax-free: € 100.800 (the inflation-adjusted exemption of €100,000, which was reintroduced in 2017).