The tax plans for 2020

The tax plans for 2020 were announced on Prinsjesdag 2019. On examining these legislative proposals, what stands out most are the issues that will have a significant impact but have not yet been included. Below, we briefly outline the aspects that appear most interesting at first glance. In doing so, we will frequently refer to documents we have published previously.

What is not included (among other things)?

It had already been announced that the recently announced change to the tax on income from savings and investments (Box 3) is not yet included. We explain these plans in our articles Investors will pay significantly more under the new Box 3 and Savings of up to €440,000 are tax-free.

However, we had expected to have a clearer picture of the content of the “current account measure” by now. For the time being, we will have to make do with what we describe in our article Combating excessive borrowing from own BV. The bill is still pending.

A reliable legislator?

Another notable feature of the 2020 tax plans is that some of the measures included in the 2019 tax plans are now being amended once again.

For example, the reduction in the corporation tax rate promised for 2020 will not go ahead in part. And the reduction in the rate for income tax deductions will not be introduced in 2021, but will take effect as early as 2020.

Income tax

The two-tier tax rate proposed for Box 1 income tax will be introduced as early as 2020, rather than in 2021. This means:

• a slightly adjusted rate on income in box 1 up to €68,507: 37.35% (2019: 36.65% up to €20,384 and above: 38.1%)
• a reduction in the top rate from 51.75% (2019) to 49.5% (2020 and 2021).

But it also means that tax deductions (including the self-employed person’s allowance) are not claimed at the top rate, but only at 46%: Let’s have another look at your financial planning.

It is important for business owners that the self-employed person’s tax allowance is reduced. This allowance, for which the business owner must work at least 1,225 hours in the business, amounts to €7,280 in 2019. This amount will be reduced by €250 each year for the next 8 years and by a further €280 in 2028, so that from 2028 onwards the allowance will amount to €5,000. The start-up allowance remains unchanged. The SME profit exemption (14% of the profit) will not be increased.

The loss of purchasing power for business owners is offset by the higher employment tax credit. This higher tax credit naturally applies to all workers.

For the higher additional tax liability for fully electric cars: see below under the heading ‘Payroll Taxes’.

Corporate tax

As mentioned above, the reduction in the corporation tax rate will not go ahead for the time being. This applies only to the reduction in the rate for profits in excess of €200,000. The corporation tax rates for the coming years (unless the legislature changes this ….) are as follows:

The increase in the substantial interest rate (income tax in box 2) has not been reversed. On dividends from your private limited company or on the sale of your substantial interest, you will pay 25% in 2019, 26.25% in 2020 and 26.9% from 2021 onwards.

The Innovation Box rate is being increased from 7% to 9%.

Payroll deductions

There are virtually no changes to payroll taxes. We describe the minimal increase in the WKR flat-rate allowance (up to €2,000) in our article WKR flat rate set at 1.7%. A targeted exemption had also been announced for reimbursements to employees for applying for a certificate of good conduct (VOG).

From 2020 onwards, employers will not be required to pay, by the end of the first tax return period of the year (January), but only in the second (February), the payroll tax due when the WKR flat-rate is exceeded (80% of the amount by which the limit is exceeded) certainly cannot be described as exciting.

With effect from 2020, the value of products manufactured in-house for the purposes of calculating discounts will be set at their market value.

For voluntary organisations, the tax plan includes the encouraging heading: indexation of the volunteer scheme. The maximum amount under the volunteer scheme (€1,700 per calendar year; the maximum monthly amount is 1/10th of the annual amount) will be index-linked annually from 2020 onwards, but rounded arithmetically to a multiple of €100. It will therefore be a few years yet before the maximum amount is actually increased.

The new additional tax liability scheme (7% of the value per year) for (electric) bicycles provided by the employer was already part of the 2019 tax plans.

The higher additional tax liability for zero-emission cars (i.e. fully electric cars) had already been announced and had therefore already been described by us: Higher tax liability for electric cars.

VAT

As regards VAT, there is a bill containing what are known as ‘quick fixes’. Business owners affected by these changes would be well advised to prepare thoroughly before 1 January 2020. We set out the new rules in our article New rules on proof of intra-Community supplies.

For VAT purposes, from 2020 onwards, it will no longer matter whether a book is supplied or lent out in paper or electronic form. In both cases, the reduced rate (9%) will apply. Providing access to news websites, for example those of daily newspapers, weekly newspapers and magazines, is also subject to the reduced VAT rate.

The bill introducing the new small business scheme (KOR) has already been passed. PLEASE NOTE: you may need to take action on this before 20 November 2019. See our article Register for the new KOR.

Transfer tax

The proposed relief for first-time buyers on the housing market will not be introduced. These people will also continue to pay stamp duty. The low rate of 2% applies to them. The standard rate of stamp duty, which applies to the acquisition of all property other than residential properties, is being increased from 6% to 7%.