On 10 October 2017, the Rutte III Government’s plans were presented. Many aspects of this 2017 Coalition Agreement had already been leaked to the press. We’ll briefly go through a few points with you below. The exact details of the proposed measures will, of course, only become clear once the necessary legislation has been published.
We’d be happy to discuss with you how your tax planning is in line with the government’s plans. As things stand at present, most of the plans set out in the Coalition Agreement are due to come into effect from 2019. However, it is of course not impossible that some measures may still be squeezed into the 2018 tax plans. It is not without reason that the debate on these plans in Parliament has been postponed.
Volunteer scheme
Attempts have been made on several occasions to set the maximum amounts for the volunteer scheme to increase. The coalition agreement states that the maximum amount of the tax-free volunteer allowance will be increased from €1,500 per year to € 1.700. These amounts have recently also come into effect within the framework of the social assistance.
Significant interest rate
Just yesterday, we explained that the abolition of dividend tax – which is indeed included in the coalition agreement – does not mean that dividends paid to directors and major shareholders are not taxed. The substantial interest tax (Box 2) applies in such cases. In our article We are using the current substantial interest rate of 25%. This rate will be increased to 27,3% in 2020 and 28,5% in 2021.
Reduction in corporation tax
The corporation tax rate is being reduced. The lower rate will fall from 20% to 16%; the high rate from 25% to 21%.
However, the previously announced increase in the tax bracket threshold will not go ahead. The lower tax rate is calculated on the taxable amount up to €200,000 (it had been announced that this would be raised to €350,000).
Furthermore, the amount on which corporation tax is payable – the tax base – is increased. This is achieved by:
- to limit the deductibility of interest on borrowed capital;
- to limit the depreciation on owner-occupied buildings to a floor value of 100% of the WOZ value (this floor value is currently 50% of the WOZ value).
Two rates for income tax
In Box 1, the current four tax bands are reduced to two:
- a basic rate of 36,93% (this tax band applies to income in Box 1 of € 68.507 and this amount is not index-linked);
- a top rate of 49,5% (payable on the excess income in box 1).
The following measures are being taken around people’s own homes:
- the notional value of the owner-occupied home is being reduced;
- the so-called ‘Hillen allowance’ is being phased out (gradually, over no fewer than 30 years);
- The mortgage interest relief will be reduced in increments of 3% per year until it reaches the basic rate for Box 1.
For entrepreneurs, the self-employed person’s allowance is being reduced. From 2020, this will take place in stages of 3% per year, down to the basic rate.
In Box 3, the figures must be aligned with the actual return. How? This is still being investigated. In the meantime, the tax-free allowance is being increased from €25,000 to € 30.000.
Wages
As expected, the payroll tax will see the 30% control maintained. However, the term will be reduced from 8 to 5 years.
The DBA Act, the enforcement of which has never even begun, is set aside in the Coalition Agreement. There will be two categories of “self-employed workers”:
- there is a employment contract where a low rate is combined with a long contract term;
- You can choose between independence (on out) at a high rate, combined with a short contract term (with a client declaration completed via a web module).
VAT
As far as VAT is concerned, the measure is simple, but it will have a significant impact. The proverbial ‘sweetener’ in the coalition agreement is to be funded, amongst other things, by an increase in the reduced VAT rate. This rate will rise from 6% to 9%.