Tax proposals in the coalition agreement

On 15 December, the VVD, D66, CDA and ChristenUnie parties presented their plans in the coalition agreement. One of the ambitions is to simplify and reform the tax system, which resulted in the announcement of changes in the tax regulations. Below we briefly explain the most important proposals.

Bill against excessive borrowing from own company

The threshold amount in the ‘excessive borrowing’ bill will be adjusted. The previously set limit for 'excessive' borrowing of € 500,000 will be increased to € 700,000. The regulation aims to discourage substantial interest holders from borrowing from their own company. Based on the bill, the excess is taxed as income derived from a substantial interest. The measure is still scheduled to enter into force in 2023.

Business succession

The coalition considers the current business succession regulations in the Gift, Inheritance and Income Tax (BOR) important for the continuity of family owned businesses. However, it does wish to improve the BOR. It must be 'simpler and fairer', whilst at the same time preventing 'improper use'. The BOR is currently being reviewed, which will be completed in 2022. Family enterprises should take into account, therefore, that the BOR will be amended in due course, but how is not clear at the moment.

Revision of Box 3

The coalition intends to abandon the flat-rate taxation of assets for the most part. As from 2025, the actual income derived from capital is to be taxed.

The value development of real estate will, however, (for the time being) continue to be taxed at a flat rate (expected to be based on the WOZ value). As a first step, the plans provide for the abolition of the fixed rebate on the WOZ value for rented properties ('vacant value ratio') as from 2023. For taxpayers that own many rented properties, this could mean a substantial increase in the Box 3 levy as from 2023. This will make a critical assessment of the Assessment under the Valuation of Immovable Property Act [WOZ] even more important.

Increase in transfer tax on non-residential properties

From 2023, the transfer tax for non-residential properties and residential buy-to-let properties will increase to 9% (currently 8%).

Abolition of the ‘cheering ton’

The increased gift exemption for an owner-occupied home (so-called cheering ton) will be abolished in 2024. It is uncertain whether you can still start taking advantage of this exemption (2021: EUR 105,302) spread over three years in 2023. If you wish to take advantage of the 3-year spread option, it may be advisable, based on the current rules, to start in 2021.

Abolition of landlord levy

The landlord levy, for corporate tax payers with ownership of a minimum of 50 rental properties below the rent allowance limit, will be abolished in 2023. In return, binding agreements will be entered into with housing corporations to achieve certain construction and climate targets.

Climate

The budgets for the investment facilities will be increased: the budget for the Energy Investment Allowance (EIA) will be increased as from 2023 and for the Environmental Investment Allowance (MIA) and the accelerated Random depreciation of environmental investments (VAMIL) as from 2025. In addition, many different measures have been announced with respect to the energy tax and the CO2 levy, among others.

Widening of corporate income tax base

The current CFC (Controlled Foreign Company) regime which aims to prevent profits from being deposited in low-tax countries, will be tightened as from 2023. The 'OECD Pillar II' (minimum rate of 15% for large enterprises) will also be introduced in 2023. If this does not result in sufficient revenue, a widening of the tax base, an increase in the low corporation tax rate and/or an extension of the low tax band will be considered. In 2022, the corporation tax rate will be 15% on the first tranche (maximum profit of EUR 395,000) and 25.8% on the second tranche (profit from EUR 395,001 and above). In this context, we refer to our newsletter of 30 November: 'Optimisation by utilising the low corporation tax rate'. 

EU and taxation

The Netherlands aspires to a leading role within the European Union with respect to tax measures and to this end will collaborate closely with like-minded Member States.

Miscellaneous

Finally, we would like to draw your attention to the following proposed measures:

  • Abolition of the averaging settlement in the personal income tax as from 2023
  • No income-related combination tax credit for children born as of 2025
  • Increase in untaxed travel allowance as from 2024
  • Gradual further annual reduction of the self-employed allowance (the standard allowance is currently EUR 6,670) in the years 2023-2030 to a final amount of EUR 1,200 (in 2030). Self-employed persons will be compensated by means of an increase in the employment tax credit.

To conclude

Many changes are on the horizon, therefore. We would like to help you take advantage of the opportunities the coalition agreement offers or to identify the consequences. Please contact your regular RSM consultant.