Dutch people in general will soon keep more of every euro they earn and work will be made more financially rewarding. Businesses, by contrast, will see an increase in their tax burden. The government will also start implementing the National Climate Agreement immediately and introduce tax measures to encourage climate-friendly behaviour. It will also take measures to combat tax avoidance and evasion.
All this is set out in the 2020 Tax Plan, which State Secretary for Finance Menno Snel presented to the House of Representatives today. Virtually all the tax measures in the coalition agreement and the National Climate Agreement will therefore soon be passed into law so that implementation can begin.
More financially rewarding work
The 2020 Tax Plan includes several measures to reduce income tax and make work more financially rewarding. The two-bracket system, for instance, will be introduced in 2020 instead of 2021. The employment tax credit and the general tax credit will be raised further. Thanks to these changes, someone earning € 25,000 per year will be € 380 better off in 2020. Those earning € 45,000 will be € 640 better off and people with an income of € 65,000 will be € 690 better off. Whether a particular person will be better off or not will also depend on changes in personal circumstances and the economic climate.
Implementing the National Climate Agreement
Virtually all the tax agreements in the National Climate Agreement will immediately be passed into law under the Tax Plan. Environmental taxes play a key role in encouraging climate-friendly behaviour. People will see the effects in their energy bills: the tax on polluting energy sources (e.g. natural gas) will gradually be raised and the tax on electricity will be lowered. This will facilitate the transition to sustainable heating.
The tax component of the energy bills of households with average energy consumption will be € 100 lower in 2020. Businesses will receive higher energy bills. As from 2020, they will pay more towards the renewable energy surcharge than private consumers – two-thirds instead of half as at present.
The government will continue to encourage the use of electric cars in the years ahead. The current tax benefits, which were due to end in 2021, will remain largely in force. For example, buyers and owners of electric cars will not pay car and motorcycle purchase tax or motor vehicle tax until 2025. To avoid over-incentivisation, the government will increase the tax on the private use of electric company cars in steps (from 4% to 8% in 2020).
A fair contribution by businesses
To reduce the burden on private individuals, the corporation tax rate on profits in excess of € 200,000 will not be reduced next year as previously planned. The rate will remain 25%. It will also be reduced less steeply after 2021: to 21.7% instead of 20.7%.
The government intends to take a further three corporation tax measures and additional steps to combat tax avoidance as from 2021.
- Businesses can currently deduct, without limit, losses arising from the liquidation of foreign subsidiaries or the termination of foreign activities from the profits they make in the Netherlands. This liquidation and termination loss facility will be modified so that businesses make less use of it and therefore pay more tax. This measure was proposed in a private member’s bill introduced by Bart Snels (Green Left Alliance) et al. It will raise € 265 million on a structural basis.
- Entrepreneurs who make a profit on innovative activities pay less corporation tax on that part of their profit. The tax rate of the innovation box is currently 7% but it will be increased to 9% on 1 January 2021. This measure will raise € 140 million on a structural basis.
- In certain circumstances, entrepreneurs can receive a discount if they pay all their corporation tax at once. This discount will be abolished on 1 January 2021. This measure will raise € 160 million on a structural basis.
To further combat tax avoidance when funds are channelled through the Netherlands to tax havens, the government is introducing a withholding tax on interest and royalties. The withholding tax rate will be as high as the corporation tax rate. This will prevent the Netherlands being used as a conduit to transfer profits to low-tax countries.
Less VAT on electronic newspapers and books
The VAT payable on electronic newspapers, magazines and books will be lowered from 21% to 9%. There will then be no difference in the VAT charged on the paper and electronic versions. The same rate will also apply to all news websites, even if they do not have physical products.
The Tax Plan also includes bills to improve and update current legislation:
- employers will have more scope to give employees benefits in kind, such as Christmas hampers and gym subscriptions, without having to pay salaries tax and national insurance contributions on them;
- the maximum tax-free remuneration payable to volunteers will be indexed to the rate of inflation as from next year;
- the self-employed person’s allowance will be lowered in stages in order to reduce the tax differences between the self-employed and employees;
- the price of a packet of 20 cigarettes will be increased by one euro on 1 April 2020. This measure was agreed in the National Prevention Pact and is in addition to the previously announced increase in excise duty;
- farmers will be exempt from the 21% insurance premium tax in order to encourage them to take out insurance against crop damage caused by extreme weather.