Tax measures contained in the 2024 – 2028 Outline Agreement

Dutch version

Introduction

On 16 May 2024, the forming political parties PVV, VVD, NSC and BBB reached an Outline Agreement. This Agreement, which will eventually have to be fleshed out into a governing agreement, includes a number of tax measures. These partly provide for the reversal of some planned increases in taxes and social insurance contributions, a number of concrete tax measures, and several tax policy intentions that are yet to be concretised. Below we discuss the most important tax measures.

Businesses

The business community will likely face the following tax measures:

• The abolition of the share buyback facility in dividend withholding tax, which was to take effect from 2025, will be reversed.
  
• The so-called earnings stripping measure for corporate income tax purposes will be adjusted by increasing the maximum interest deduction from 20% to 25% of the adjusted profit. This deduction rate would be more in line with the European average.
• Unlike what was announced in the 2024 Spring Memorandum, there will not be a reduction in the SME profit exemption from 12.7% to 12.03% by 2025.
• It will be examined whether, and if so how, the tax benefits under the extraterritorial expenses scheme (which also includes the 30% facility) can be cut back. Concrete measures have not yet been mentioned.
• From 2026, the contribution to the General Unemployment Fund (Algemeen Werkloosheidsfonds, or ‘AWF’) for both permanent and flexible contracts will be increased by 0.1 percentage point.
• With effect from 2025, the gambling tax rate will be raised to 37.8%, up from 30.5%.
• There are also plans to step up the efficiency of the tax system and to further simplify it. The government’s term of office will be used to pursue further steps in phasing out negatively assessed tax schemes and tackle unintended arrangements. This should raise EUR 250 million in revenues. However, should the proposed revenues not be generated, the inflation adjustment of personal income tax brackets and credits will be limited using the adjustment factor.

Private individuals

The following tax measures have been proposed for private individuals:

• The Outline Agreement seeks more pay for working people by easing the burden on labour and reducing the marginal tax rate for citizens. This includes the introduction of a third tax bracket in wage and personal income tax. What’s more, gradual improvements in social security, tax schemes and allowances will be implemented to make work pay more.
• Effective from 1 January 2024, a 24.5% bracket rate in box 2 up to EUR 67,000 in box 2 income was introduced. The rate for the excess is 33%, which top rate will be reduced to 31% from 2025. This reverses an amendment to the 2024 Tax Plan as adopted by the House of Representatives.
• To reduce the box 3 rate, which will be 36% in 2024, EUR 100 million will be made available structurally. As yet it is unclear what rate reduction this will lead to.
• In the years to come, the deduction for gifts for personal and corporate income tax purposes will be reduced, with a first step to be taken in 2025. From 2028, there will no longer be any distinction between different types of gifts in personal income tax.
• The mortgage interest deduction remains in place and the notional rental value will not change either.
• The minimum wage increase will be reversed from 1 July 2024.
• As from 2025, structural amounts will be made available to push back poverty. These amounts will be used to increase the rent allowance (500 million euro) and the child-related budget (300 million euro). In addition, the revision of the childcare system (almost free for working parents and transfer to institutions) will be carried through.
  

VAT

The Outline Agreement provides for an increase in VAT in the following two areas:

• The reduced VAT rate for lodging will be abolished from 2026, raising the VAT rate for these services to 21%. Camping sites will be exempted from this.
• The reduced VAT rate for cultural goods and services will be abolished from 2026. Day trips and cinemas will be exempted from this.

Energy and environmental taxes

Finally, the Outline Agreement contains a number of energy and environmental measures:

• The energy tax hike announced in the 2024 Spring Memorandum (increase of the 3rd, 4th and 5th energy tax bracket for natural gas by 22.4% from 2025 and by an additional 2.7% in 2030) will be reversed.
• Energy tax on natural gas will be reduced by lowering the rate in the 1st and 2nd brackets (up to 170,000 m3) by 2.8 cents per m3 from 2025, and by 4.8 cents per m3 in 2030.
• Air passenger tax will be differentiated by distance from 2027. Longer-distance flights, which generate more emissions, will then be taxed more heavily. This measure is budgeted to generate EUR 248 million in revenue.
• The excise duty cut on fuels will be extended up to and including 2025 and will expire after that year.
• The government will continue to promote the creation of a sustainable vehicle fleet as well as the purchase of electric cars. But the related subsidies will be discontinued from 2025, except for the weight correction in motor vehicle tax.
• Red diesel for the agricultural sector will be reintroduced as of 2027.
• The netting scheme for low-volume users will be abolished at once and entirely as of 2027.
• A circular tax on plastic will be introduced as of 2028.
  It should be emphasised that the above measures are not yet final. They are yet to be turned into bills to be passed by the House of Representatives and the Senate.
   

Sources: Hoofdlijnenakkoord tussen PVV, VVD, NSC en BBB en Budgettaire bijlage hoofdlijnenakkoord