Tax measures announced in the Spring Memorandum has been saved
Tax measures announced in the Spring Memorandum
The government published the Spring Memorandum on 20 May 2022. Several tax increases have been announced to cover the additional spending required.
24 May 2022
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On 20 May 2022, the Spring Memorandum 2022 was presented, informing parliament of the state of the nation's finances. The geopolitical situation and rising inflation have significant financial implications. In addition, financial coverage had to be found for restoration of rights and bridging legislation with regard to box 3. Part of the additional spending required will be met by increasing the tax burden. Below we have included an overview of the most important tax measures announced.
Corporate Income Tax
Corporate income tax bracket limits
The regular corporate income tax rate for 2022 is 25.8%. However, a reduced rate of 15% applies, also known as the basic rate, up to a taxable amount of EUR 395,000. The government has decided to lower this bracket limit to EUR 200,000 by 2023. The expected budgetary revenue from this measure is EUR 1.3 billion a year.
Tightening of the 30% facility
Under certain conditions, employees recruited abroad to be employed by a withholding agent in the Netherlands may apply the so-called 30% facility, under which part of the agreed wage is regarded as a tax-free reimbursement for extraterritorial costs for a maximum of five years. This facility will be limited over a three-year period to a maximum of the standard under the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act (WNT) (2022: EUR 216,000). The expected structural revenue is EUR 85 million.
Increase in untaxed travel allowance
The proposed increase in the untaxed travel allowance will be brought forward by one year to 2023. This will involve an amount of EUR 200 million in both 2023 and 2024. The media reports that this would involve increasing the untaxed mileage allowance from EUR 0.19 per km in 2022 to EUR 0.21 per km in 2023 and EUR 0.23 per km in 2024. But the exact amounts will presumably not become clear until Budget Day.
Customary salary for directors and major shareholders
Taxpayers who perform work for a company in which they or their tax partner holds a substantial interest must take into account a customary salary. As a starting point, this must be at least 75% of the salary from the most comparable employment. The government proposes to increase this percentage to 85%. In the first few years, this measure will generate approximately EUR 300 million. However, the structural yield is only limited because the future tax claim in box 2 actually decreases.
Two-bracket system box 2
Starting in 2024, a two-bracket system will be introduced in box 2 with a basic rate of 26% for income up to EUR 67,000 (per taxpayer) and 29.5% on the excess. This measure is expected to structurally generate EUR 70 million a year.
Tax-free assets box 3
The restoration of rights for objectors and the bridging legislation in box 3 involve an amount of EUR 3.6 billion for the time being. However, the government is foregoing the planned increase in the tax-free capital from EUR 50,000 to EUR 80,000 per taxpayer. This is expected to generate EUR 300 million per year.
Abolition of tax-deferred retirement reserve for the self-employed
Entrepreneurs in box 1 who meet the hour criterion may allocate part of their profits to the retirement reserve. In 2022, this is 9.44% of the profit, up to a maximum of EUR 9,632. As of 1 January 2023, this is no longer possible. Existing retirement reserves do not have to be released, but will be settled under the existing rules.
Phasing out of general tax credits
The general tax credit is income-related. The maximum amount in 2022 is EUR 2,888. However, this tax credit is reduced by 6.007% for box 1 income in excess of EUR 21,317. As of 2025, this phase-out will also apply to box 2 and box 3 income and thus also affect taxpayers who primarily receive income from substantial interests or from savings and investments. The targeted budgetary revenue is EUR 325 million a year.
No increase in senior citizen tax credit
The EUR 376 increase in the senior citizen tax credit agreed to in the coalition agreement will be cancelled. This measure primarily affects middle-income senior citizens and yields EUR 600 million in tax revenues.
Gift and inheritance tax
Business succession scheme
The Spring Memorandum did not discuss the business succession scheme (bedrijfsopvolgingsregeling, or ‘BOR’) or include any budgetary revenue. It did state that in the run up to Budget Day, the government would examine how to better balance the ratio between taxes on capital and labour, including an evaluation of the BOR. In its April 2022 report, the CPB Netherlands Bureau for Economic Policy Analysis concluded that while the BOR is effective, certain elements are inefficient in that not all parts of the BOR contribute to the desired continuity of businesses. It suggests to abolish the exemption of the value (going concern) and expand the existing payment scheme. We expect more information about this on Budget Day.
Property transfer tax
Increase in general rate
The general property transfer tax rate will be increased to 10.1%, up from 9%. This rate applies to the acquisition of all property, except for homes that serve as the acquirer’s primary residence. This is subject to a rate of 2%. Under certain conditions, an exemption from property transfer tax applies to starters who acquire a home for their own use. This exemption will be maintained. The measure is expected to generate EUR 325 million.
VAT and excise duties
Temporary reduced VAT rate for energy
To cushion the impact of the high energy bill on consumers, the government has taken additional purchasing power measures relating to VAT for 2022. The 9% reduced VAT rate will be temporarily applied to the supply of natural gas through the natural gas system, to the supply of district heating through a district heating network, and to the supply of electricity through the electricity network from 1 July 2022 through 31 December 2022.
Temporary excise duty reduction on fuel
To cushion the sharp rise in fuel prices, the government has temporarily reduced the excise duty on gasoline, diesel and LPG by 21% from 1 April 2022. In the Caribbean Netherlands, the excise tax on gasoline has been reduced by 16 cents per liter. Like the temporary VAT reduction on energy, these measures apply until 31 December 2022.