What important tax proposals for entrepreneurs did the Minister of Finance, Sigrid Kaag, pull from her briefcase on Prince’s Day 2023? An explanation of the ten most important ones is provided below.
1. First step taken to tighten up business succession scheme (BOR)
The aim of the business succession scheme (BOR) and transfer facility (DSR) is to remove, as far as possible, the obstacles presented by the normal (high) level of taxation that applies to a business succession. You can therefore pass on the baton to the next generation with a fiscal incentive. The BOR thus plays an important role in the transfer of family companies. Considerable attention has been paid to the BOR and the rationale behind, resulting in an announcement that the scheme is being tightened up.
From 1 January 2024 property that is being rented out will no longer be classified as business assets, but will fall under investment assets. It will then no longer be possible to gift such property under the BOR.
Please note! The above change will also affect the level of business assets when applying the transfer facility in the area of income tax. This means that the person making the gift will no longer be able to transfer the corresponding portion of the box 2 tax claim that applies to the shares.
Please note! Further measures to tighten the rules have been announced for 2025 and 2026, such as the abolition of the efficiency margin that allows 5% of business assets to consist of investments.
Tip! Are you considering gifting your business and applying the BOR? If so, it may be advisable to speed up this process.
2. Two bands in box 2
From 1 January 2024 the uniform rate of 26.9% in box 2 will be replaced with two rates. Dividends received up to € 67,000 will be subject to a rate of 24.5%. A rate of 31% will apply to the excess amount. Tax partners will benefit twice from the low band, which means, for example, that a dividend payment of € 134,000 will be taxed at the low rate of 24.5%.
With this measure the government wants to encourage holders of substantial shareholdings to pay out profits more often (annually) instead of hoarding them in their company.
Please note! Dividend payments also affect the general tax credit, box 3 assets and excessive loans. Talk to your advisor about whether paying a dividend now would be advantageous or whether it would be better to wait until 2024 or to pay a higher amount as a dividend later all at once.
Tip! Does your partner have no income? If that is the case, pay out a dividend to take advantage of the general tax credit.
3. Reduction in SME profit exemption
The SME profit exemption is a deductible from your taxable profit for income tax purposes. From 1 January 2024 the rate of this exemption for entrepreneurs will be reduced from 14% (2023) to 12.7%. This means that entrepreneurs who are subject to income tax, such as sole traders, general partnerships and self-employed persons, will pay more tax from 2024. Those with the highest profits will be the biggest losers from this change.
Tip! Ask your tax advisor whether your business being subject to income tax is still the best option for you.
Tip! Think about whether you could defer certain costs until 2024 so your profits will be lower and you will pay less tax on them.
4. Various changes in box 3
As things stand, the aim is for actual returns to be taxed in box 3 from 2027 onwards. Until that time imputed returns will continue to be taken as a basis. There are three categories: bank and savings balances, investments and debts.
It has been stipulated by law that from 2024 shares in homeowners’ associations (VvEs) will fall under the category of bank and savings balances. Do you own a flat? If so, this may mean that you will pay less tax in box 3. This ‘reclassification’ will also apply to funds held in a notary’s client accounts.
The tax-free allowance in box 3 is not being adjusted for inflation. In addition, the rate in box 3 will be rising from 32% (2023) to 34% in 2024.
Tip! On 18 September 2023 the Advocate General concluded that the Box 3 Reparations Act (Wet rechtsherstel box 3) also infringed the prohibition of discrimination and the right to property. If the Supreme Court follows this advice, this may have consequences for your box 3 income. You should therefore make sure you lodge an objection in good time to safeguard your rights.
Please note! In 2024 claims and debts that exist between tax partners and between parents and minor children will not belong to any category, as they will no longer be subject to tax. It will therefore be possible to omit them entirely from your tax return.
5. Various changes in box 1
Tax on income from employment and home is being increased in a number of areas:
- Income tax in box 1 is divided into two bands. From 2024 the second band will be indexed below inflation. The indexation will be 3.55% instead of 9.9%. For pensioners the income tax applicable to pension income will comprise three bands. The second and third bands will also be indexed at 3.55% instead of 9.9%.
- The rate applicable in the first tax band is increasing by 0.04 percentage points from 36.93% (2023) to 36.97% (2024).
- The employed person’s tax credit is increasing by € 115 for incomes around the statutory minimum wage. This will benefit employees with salaries of up to almost € 40,000.
6. Energy investment deduction (EIA) scaled back
Is your business investing in energy-saving assets? If so, it is possible to deduct a certain percentage of the investment amount directly from your profit via the energy investment deduction (EIA). As this means your profit will be lower, you will pay less tax as an entrepreneur. For 2023 the rate is 45.5%. This will be reduced to 40% in 2024. Changes are also being made to the Energy List of energy-saving investments that qualify for the EIA. The precise details will be determined in the fourth quarter of 2023.
Tip! Are you considering an investment in energy-saving assets? If so, it may be worthwhile to do this in 2023. Make sure that you notify the Netherlands Enterprise Agency (RVO) of your investment in good time.
7. Fewer untaxed allowances for staff
The work-related expenses scheme allows you, as an employer, to grant your employees all kinds of allowances and benefits in kind free of tax. The fixed budget under the work-related expenses scheme was expanded on a one-off basis in 2023 to 3%, on a wage bill of up to € 400,000. In 2024 it will be limited to 1.92% of your wage bill up to € 400,000 and 1.18% on the excess amount.
Please note! The tax- and contribution-free kilometre allowance of € 0.21 per kilometre is increasing to € 0.23 per kilometre from 1 January 2024.
8. Purchase of car/van to become more expensive
In 2025 it will become more expensive to purchase a new car. The flat-rate portion of private motor vehicle and motorcycle tax (BPM) will be increasing by € 200. BPM is a tax payable on the purchase of a new car or motorcycle. An exemption from BPM will still apply to electric cars next year. In 2025 this exemption will be scrapped, which means the purchase price of electric cars will be higher in 2025 than in 2024.
The BPM exemption for vans will also no longer apply from 1 January 2025.
Tip! Do you want to take advantage of the BPM exemption for entrepreneurs who are subject to VAT when purchasing a van? If so, place the order promptly, so you can benefit from the exemption in 2024!
Tip! The level of BPM payable on vans depends on the vehicle’s CO2 emissions. If you replace vans after 1 January 2025, it is therefore fiscally advantageous to replace your vans with zero-emission variants.
9. Introduction of minimum hourly wage
The Netherlands has a statutory minimum wage. This takes the form of a monthly minimum wage. From 2024 it will change to an hourly minimum wage. Everyone aged 21 or above who is working for the minimum wage will therefore receive the same hourly pay. A monthly, weekly or daily wage will not be permitted.
Please note! The minimum monthly wage will be converted to an hourly wage on the basis of a 36-hour working week. This means that employers will face an increase in wage costs if they have employees who are contracted to work for more than 36 hours a week for a minimum hourly wage.
10. More reporting obligations
From 1 January 2024 a number of new reporting obligations will be introduced. Employers with more than 100 employees, for example, will have to keep a record of the CO2 emissions of their staff. In addition, payment service providers will be required, under certain conditions, to share all payment data relating to cross-border transactions with the Tax and Customs Administration, with the aim of combating VAT fraud. Lastly, digital platforms will have to report on their sellers for the first time.