2011 Tax Plan: Incentives for entrepreneurship and innovation
Extra measures to encourage entrepreneurship and innovation, new rules to combat fraud and tax avoidance, and very fuel-efficient cars will still be tax-friendly. These are the main points in the 2011 Tax Plan of the Minister of Finance, Jan Kees de Jager.
“To ease the pain of the crisis we are making great efforts in 2011 to stimulate entrepreneurship and innovation. Because it is the entrepreneurs who are helping us back on our feet. At the same time, everyone must pay their share. And so we will take measures against people or companies purposely circumventing the tax rules. And also the focus on hidden savings will be expanded", says Minister De Jager.
The 2011 Tax Plan comprises a number of measures to encourage entrepreneurship. For example, corporation tax will be reduced in 2011 by one-half per cent to 25%. And the SME rate will be introduced on a permanent basis: corporation tax on the first € 200,000 in profit will be reduced to 20%. In addition, the liquidity position of business will receive a substantial impetus from the extension of the expanded loss carry-back facilities, definitive introduction of the quarterly VAT return for all businesses in the Netherlands and extension of the temporary arbitrary depreciation scheme. The tax incentive scheme to reduce the wage costs of research and development (Promotion of Research and Development Act) will be permanently expanded and to encourage innovative entrepreneurship the innovation box will also be expanded. Finally, at the request of employers, the work-related costs scheme, which will take effect in 2011, will be relaxed on a number of points.
Fraud and tax avoidance
The 2011 Tax Plan contains important measures against fraud and tax avoidance:
- Supplementary legislation will stop investors and entrepreneurs using artificial arrangements to avoid corporation tax and transfer tax.
- The Tax Administration will be given statutory power to exchange information on savings accounts and other banking details with countries outside the EU. The existing regulations for EU countries on automatic exchange of savings balances will be expanded to include information on other banking details such as securities and insurance products. This means that people with hidden savings run a greater risk of being found out.
- The tax allowance for little or no outstanding home acquisition debt sometimes gives an unintended twofold benefit to people who have financed their homes with an employee loan; this will be repaired.
These measures are expected to yield an estimated revenue of more than € 300 million per year.
In 2011 there will be no change in the tax benefits for highly fuel-efficient cars (besides being exempt from purchase tax on cars and motorcycles (BPM) and from motor vehicle tax, they are subject to a lower rate of notional income, 14%). The Netherlands presently has over 200,000 highly fuel-efficient cars. Because the tax benefits for these cars are meant to permanently encourage further greening, the government will investigate whether the conditions (limits on CO2 emissions) can be adjusted upward periodically. Moreover, the government announces that taxpayers will be able to count on the tax benefits over a longer period. Current owners of highly fuel-efficient cars will retain their entitlement to the zero rate of motor vehicle tax until at least 2013. On another front, the phasing out of the BPM announced in 2008 and the related increase in motor vehicle tax will be suspended pending a definitive decision on the kilometre levy.
The package of temporary tax measures to stimulate the housing market was announced at the end of August. Measures include a temporary reduction of the VAT rate for labour costs in renovation projects. In addition, people who pay two mortgages (when they have bought a new house but not yet sold the old one) will temporarily be eligible for mortgage interest relief for both homes for an additional year, thus expanding the period from two to three years. And if a home is bought in 2011 and sold again within twelve months, transfer tax for the second sale is due only on the profit, if any.
Tax measures for purchasing power
To compensate for the higher healthcare contributions in 2011, personal income taxes will be reduced (a lower tariff in bracket one) and the bandwidths of the three brackets will be expanded. To encourage labour force participation, the earned income tax credit will be increased, thus making it more profitable to have a job. Furthermore, persons aged 65 or over will profit from a higher elderly person’s tax credit.
On the Tax Plan
The Tax Plan is presented each year on the third Tuesday in September (together with the Budget Memorandum). For 2011, the State expects to receive € 225 billion in income from taxes and social security contributions, such as wage withholding tax and income tax, corporation tax and motor vehicle tax. After it has been approved by Dutch Parliament, the 2011 Tax Plan will take effect on 1 January 2011.