2018 Tax plan - Outline of wage and income tax measures

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Outline of wage and income tax measures

2018 Tax Plan - Budget Day (Prinsjesdag)

The following lists the measures proposed in the 2018 Tax Plan in respect of the wage and income tax.

5 December 2017

Outline of wage and income tax measures

Dutch version

Back to outline 2018 Tax Plan

Tax credits and rates

The incomes policy measures are aimed at improving the purchasing power of Dutch households. The measures specifically focus on strengthening the purchasing power of benefits recipients and pensioners, since their purchasing power threatens to fall. The purchasing power of the lowest incomes shows a slowdown compared with the purchasing power of the high incomes. The purchasing power package comprises investments in the expenditure and expenses measures. The government aims at an overall rise for all groups in 2018. As part of this, one of the measures in the 2018 Tax Plan is an increase of the elderly person's tax credit. In addition to the measures in the 2018 Tax Plan, the purchasing power package provides for an increase of the healthcare benefit, a slower reduction of the social assistance benefit, an increase of the child-related budget and a reduction of the income support under the General Old Age Pensions Act.

The following tables reflect the changes in rates, tax brackets and tax credits compared with 2017:

Tax credits

Balance 2018

Balance 2017

Maximum general tax credit below state pension age

EUR 2,265

EUR 2,254

Maximum general tax credit above state pension age

EUR 1,157

EUR 1,151

Reduction percentage general tax credit

4.683%

4.787%

Minimum general tax credit

EUR 0

EUR 0

Maximum employment credit

EUR 3,249

EUR 3,223

Reduction percentage employment credit

3.60%

3.60%

Minimum employment credit

EUR 0

EUR 0

Accrual rate employment credit

28.067%

28.317%

Maximum income-related combination credit

EUR 2,801

EUR 2,778

Young disabled person’s tax credit

EUR 728

EUR 722

Elderly person's tax credit

EUR 1,418/EUR 72

EUR 1292/EUR 71

Single elderly person's tax credit

EUR 423

EUR 438

 

Bracket limits

2018

2017

End of first bracket

EUR 20,142

EUR 19,982

End of second bracket born before 1 January 1946

EUR 34,404

EUR 34,130

End of second bracket born after 1 January 1946

EUR 33,994

EUR 33,791

End of third bracket

EUR 68,507

EUR 67,072

 

Combined rates income tax/wage tax and contribution for the social insurances

2018

2017

Rate first bracket below state pension age

36.55%

36.55%

Rate first bracket above state pension age

18.65%

18.65%

Rate second bracket below state pension age

40.85%

40.80%

Rate second bracket above state pension age

22.95%

22.90%

Rate third bracket

40.85%

40.80%

Rate fourth bracket

51,95%

52,00%

 

Adjustment percentage energy-saving investment credit

The percentage of the energy-saving investment credit will be reduced by 0.5 percentage points. The debate on the 2017 Tax Plan resulted in an amendment according to which a wage tax credit has been implemented, making it easier for innovative business start-ups to grant employees share option rights. It was suggested at the time to reduce the percentage of the energy-saving investment credit by 0.5 percentage points as from 1 January 2018, to provide for financial coverage for this adjustment. Erroneously, the intended reduction had not been included in the amendment. The 2018 Tax Plan repairs this omission.

Adjustment of partner concept

If certain circumstances are met, under the current statutory regulation persons under 27 years of age for whom the taxpayer has received a foster care allowance or child benefit can be qualified as a partner of the taxpayer. As this can be undesirable, the House of Representatives pushed for creating the possibility, for purposes of income tax and allowances, to file a joint request and opt not to be regarded as partners.

Extension of exemption foster care allowances

Up to 1 January 2018, foster care allowances granted for taking care of foster children are exempted from income tax. By implementing this temporary exemption, the legislator intends to avoid any discussions as to whether this involves a source of income. Anticipating an evaluation, it has been decided to extend the exemption up to 1 January 2019.

Increase of tax-free allowance in box 3

Effective 1 January 2018, the tax-free allowance in box 3 will be raised to EUR 30,000 per taxpayer (2017: EUR 25,000). This is intended to spare small savers. Also, more up-to-date figures will be used to calculate the yield on the savings part of a person’s capital. As a result, the fixed yield to be taken into account for small capitals in 2018 will be substantially lower:

Net assets

Notional yield 2018

€ 0 – € 70.800

2,02%

€ 70.800 – € 978.000

4,33%

> € 978.000

5,38%

Extension of multiplier in respect of deduction for gifts

An increased deduction for gifts for income tax and corporate income tax purposes has been in place since 1 January 2012, relating to gifts to cultural institutions. Although this temporary incentive was to be abolished on 1 January 2018, the House of Representatives has decided to finally write into law the “cultural multiplier” in respect of deductions for gifts.

Time limit capital sum insurance

The time limits for qualifying for an exemption for a capital sum insurance associated with homeownership (kapitaalverzekering eigen woning - “KEW”), an owner-occupied savings account (spaarrekening eigen woning - “SEW”), or an owner-occupied home blocked investment account (beleggingsrecht eigen woning - BEW) were fully abolished on 1 April 2017. As a result, the requirement that annual contributions must have been paid for at least fifteen years (KEW), or deposits must have been made (SEW or BEW) no longer applies. In terms of applying the high exemption it will then be sufficient for an annual contribution or deposit to have taken place every year within a 1:10 band width, and for the benefit to be applied for a full or partial redemption of the home acquisition debt. The State Secretary has added to this by approving that the time limits for capital sum insurances concluded under the so-called General Tax Reform Regime no longer need be applied. This approval is now written into law.

No fictitious employment non-executive directors of listed company

The fictitious employment for supervisory directors was abolished on 1 January 2017. This resulted in unequal treatment of supervisory directors compared with non-executive directors of listed companies, despite their similar supervisory roles within a company. This is why the government now proposes to abolish the fictitious employment for the latter category of directors, too. Executive directors of both listed and non-listed companies continue to be subject to wage tax. The Trade Register is where the distinction between executive and non-executive directors is shown, for that matter.


Related article:

Pseudo final levy excessive severance pay

Employers are subject to 75% wage tax on the excessive part of severance pay granted to employees. However, there is no levy to the extent the severance pay relates to wage and benefits from share option rights granted in an earlier year than the calendar year prior to the year in which the employment was terminated. In that case the legislature considers there to be insufficient reason to assume the share option rights relate to the termination of the employment. In its ruling in December 2016, the Supreme Court judged the abovementioned exception to likewise apply to option rights whose character is still conditional at the time they are granted. Fear of tax structures has prompted a proposal to reverse this consequence through an amendment of the law.

Limitation application tax credit non-resident taxpayers

Non-resident taxpayers residing in an EU or EEA Member State and whose income is subject to wage or income tax in the Netherlands for at least 90% (qualifying non resident taxpayers) are entitled to the same benefits as resident taxpayers. This includes the tax component of the tax credits.

Non-resident taxpayers who fail to meet the above income criterion, but who reside in an EU or EEA Member State, are solely entitled to the tax component of labour-related tax credits. Non qualifying non-resident taxpayers from other countries are not entitled to the tax component of the tax credits for income tax purposes. However, this distinction is not made for wage tax purposes. As a result, in many cases too much tax credits are applied.

The tax component of the tax credits has shown a steady increase in recent years. Hence, for wage tax purposes the government solely wants to apply the tax component of the tax credits to which non qualifying non-resident taxpayers from the related country are entitled for income tax purposes. This should be implemented as from 2019. This means qualifying non-resident taxpayers will need to exercise their entitlement to the tax component of non-employment related tax credits for income tax purposes.

R&D tax rebate

If a withholding agent wants to apply the R&D tax rebate, it is held to report the hours spent and the costs and expenditures incurred for each R&D statement to the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland - RVO). As part of reducing the administrative burden it is now being arranged that a joint statement can be provided, encompassing all R&D statements issued in a calendar year.

Budget Day 2017 - Webcast

After Budget Day, Deloitte Tax Lawyers discussed the new proposed bills during a webcast, on Wednesday September 20, 2017. You can see the recorded webcast (in Dutch) here.

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