2019 Tax Plan: households will have more to spend
The government is making changes to the tax system. We are making it greener, raising consumption tax, and – importantly – making work more financially attractive. Tax rates are going down and tax credits are going up. These measures mean that 96% of people will have more purchasing power next year.
The government is also taking steps to combat tax evasion and avoidance, and improve the Dutch business climate. On balance, nearly all businesses will benefit during the government's term of office.
All this is set out in the 2019 Tax Plan, which State Secretary for Finance Menno Snel presented to the House of Representatives today. On average, households will have an extra €500 per year to spend, with those in work benefiting most from the government's measures. From around 16:00 today everyone will be able to estimate how the most important measures will affect them using Prinsjesdagtool.nl.
The main changes:
Introduction of two-bracket system
Thanks to the gradual introduction of a two-bracket system, with a basic rate and a top rate, anyone earning €20,000 or more per year will have a higher disposal income. This also means that incomes will be less dependent on whether a household consists of one or two people. In 2021, the basic rate will be 37.05% and the top rate 49.50%. In 2019 the tax rate in the current first tax band will be 36.65%, and the rate in the second and third tax bands will be 38.10%.
Increase in employed person's tax credit
An increase in the employed person's tax credit will mean that those earning between €20,000 and €60,000 per year will have a higher net income.
Increase in general tax credit
An increase in the general tax credit will mean that people earning up to €50,000 per year will have a higher disposable income. In the run-up to Budget Day, the government raised the tax credit for 2019 by an extra €44 to improve purchasing power, especially for benefit claimants and people on low incomes. This is on top of the €140 increase envisaged in the coalition agreement.
The government will pay for the reduction in taxes on labour partly by increasing economically less distortive taxes. For example, groceries will become slightly more expensive due to the low VAT rate being raised from 6% to 9%. In practice, this means that goods costing €100 today will cost an extra €2.83 in 2019. Nevertheless, most people will still be better off in 2019.
In addition, the government is reducing several deductible items for people on higher incomes, including mortgage interest tax relief and the self-employed person's tax allowance.
The more something pollutes the environment, the more heavily it will be taxed. That's why the tax on natural gas is going up, while that on electricity is going down. From next year, landlords who make rental dwellings more energy-efficient will qualify for a tax rebate.
Anyone who wants to travel to work by bike (electric or otherwise) will be given an incentive to use a company bicycle by means of a simplification of the relevant tax scheme. For an e-bike worth €2,000, an employee earning €35,000 will pay less than €5 per month from 2020.
The Netherlands wants to attract international businesses that make a genuine contribution to the economy. To achieve this, the government is presenting an ambitious package of measures.
They include a reduction in corporation tax, the abolition of dividend tax, and the introduction of a withholding tax on dividends paid to low-tax jurisdictions and in situations where the tax system is being abused. This will prevent the Netherlands from being used as a conduit to tax havens. In addition, €100 million will be made available for SMEs on a structural basis as of 2020.
Steps will also be taken to tackle arrangements designed to avoid paying tax – such as distributing money to shareholders or giving it to family members. It will be possible, for example, to recover lost taxes from shareholders who have received a profit distribution or from family members who have received a gift, with retroactive effect to 18 September 2018.
The government also intends to reduce the levy on landlords by €100 million on a structural basis.
The corporation tax rate for profits of up to €200,000 will be reduced in steps from 20% to 16% in 2021. The rate will also be reduced for profits above €200,000, but by a smaller amount than envisaged in the coalition agreement: the rate in 2021 will be 22.25% instead of 21%. In addition, the tax rate on income from a substantial interest (box 2) will be raised, but by 1.6 percentage points less than proposed in the coalition agreement: i.e. to 26.25% in 2020 and 26.9% in 2021.