Tax plans 2019

On 18 September 2018, Budget Day, the Rutte III Cabinet announced the tax plans for 2019. Many of these plans are already known from the Coalition agreement and leaked information. It involves no less than seven bills in total. Below in a nutshell are some highlights.

Want to know what the measures mean for your tax and financial planning?
We list it for you.

Purchasing power

There is much to do about purchasing power. Almost everyone should improve in 2019. There are many factors affecting purchasing power. The improvement in purchasing power occurs simultaneously with the shift from levying wage and income tax to levying VAT. But in addition, things like allowances play an important role for purchasing power.

Income tax

The most important income tax measure is the introduction of the two-tier system. Income from work and home (box 1) up to €68,507 will be taxed at the basic rate; the excess at the top rate. From 2021, the basic rate for non-AOW recipients (tax and contributions) will be: 37,05%. The top rate will be 49,5%. Incidentally, for the purpose of premiums, the first rate bracket will be split into 2 parts.

In addition, the tax credits are being tinkered with again. These are the amounts that are deducted from the calculated income tax. Through the tax credits, it is made more interesting to work. The labour tax credit will be increased and the phasing-out of the income-dependent combination discount will be different.

A measure also already announced concerns the deductibility of various deductions at the lowest rate. This concerns the following deductions:

• entrepreneur deduction (self-employment deduction, additional work deduction, starter deduction, cessation deduction and R&D deduction);
• SME profit exemption;
• TBS exemption;
• personal deductions (expenditure on maintenance obligations, specific care costs, weekend expenses for the disabled, educational expenses and gifts).

This, like the rate for home deductions, will be realised in a number of steps. Below is the overview of the rates at which the deductions will be realised in the years 2018 to 2023:

Rates in box 2 (substantial interest income) will be increased to 26,9%. This rate is due in 2021. In 2019, the current rate of 25% will be maintained and in 2020 a rate of 26,25% HEDGED.

For DMSs, the Cabinet announces a current account measure. The contours of this measure are described in the offer letter to the 2019 tax plan package. In 2022, the amount of the DGA's debts to the BV(s) above €500,000 will be regarded as a taxed profit distribution (taxed at the rate in box 2; see above). There will be a transitional arrangement for an owner-occupied home debt of the DGA a the BV.

VAT

In the context of VAT, there are three changes in particular:

• Increase in the reduced VAT rate (from 6% to 9%);
• Transformation of rules for small entrepreneurs;
• widening of the sports exemption.

The increase in the reduced VAT rate has already been announced in the coalition agreement. We described the consequences of this measure as in our fact sheet Raising reduced VAT rate (6% becomes 9%). We describe the main items affected by the reduced VAT rate in the article Increase in reduced VAT rate costs an average of €300.

The transformation of the KOR (small business scheme) had also been announced. We wrote about it in our article KOR to be modernised. The amount of the turnover limit to be used was not clear at the time. This limit is set at €20,000. Entrepreneurs who realise a turnover of less than € 20,001 in a year can choose not to participate in VAT. They then do not pay VAT, but are obviously not entitled to deduct VAT either. A small entrepreneur is bound by the choice for at least 3 years. If the turnover limit is exceeded, VAT liability arises with effect from the transaction by which the limit is exceeded.

We already described the widening of the sports exemption (and the subsidy scheme being created) in our article Subsidy scheme to stimulate construction and maintenance of sports facilities.

Dividend tax

The discussion regarding the abolition of dividend tax will not have escaped anyone's attention. The proposal to abolish dividend tax is part of the 2019 tax plans. Whether this proposal will reach the finish line is by no means certain.

For DMSs, the abolition of dividend tax does not affect the tax burden. After all, for them, dividend tax is an advance levy on income tax in box 2. We explain in our article Dividend tax abolished, but AB tax raised.

Simultaneously with the abolition of dividend tax, a new withholding tax on dividends will be introduced. This tax targets dividends to low-taxed countries and abusive situations.

Corporate tax

The corporate tax rate will be reduced. This will be done incrementally. The overview of the rates for the coming years:

The reduction in rates is financed by a number of measures, which broaden the tax base (the amount on which corporation tax is calculated):

• A measure against earnings stripping;
• fiscal investment institutions will no longer be allowed to invest in Dutch real estate;
• loss carry-forward will be scaled back (the period will be reduced from 9 to 6 years);
• depreciation on owner-occupied buildings is restricted (the floor value becomes 100% of the WOZ value).

Payroll tax

The measures on rates and rebates, as described under the heading of income tax, obviously also apply to payroll tax.

The volunteer scheme is widened slightly. The scheme applies if the volunteer's total compensation (cash and kind) does not exceed €170 (was €150) per month and does not exceed €1,700 (was €1,500) per calendar year.

The rules around the company (electric) bicycle be simplified. From 1 January 2020, an addition to the employee's salary of 7% of the new-bike value will suffice. That addition must be made annually. The scheme may only be applied if the bicycle is used partly for business purposes. For this purpose, commuting is considered business. No addition is required for a bicycle used exclusively for business, but in that context, commuting does not count as business.

The term of the expatriate-relevant 30% control will be shortened from 7 to 5 years. This also applies to ongoing cases! After this period expires, the expat's actual extraterritorial expenses cannot be reimbursed tax-free.

With regard to ZZP-ers and fighting false self-employment (the successor to the DBA Act), the tax plans contain no news. The entry into force of the new rules in this doctrine is, according to a previously published timetable, anticipated from 1 January 2020.

Furthermore, there will be several changes to labour law regulations. These include the WAB, the WIEG and the compensation for the transitional allowance.