2019 Tax plan - Outline of wage and income tax measures


Outline of wage and income tax measures

2019 Tax Plan - Budget Day (Prinsjesdag)

The following lists the measures proposed in the 2019 Tax Plan in respect of the wage and income tax.

20 September 2018

Outline of wage and income tax measures

Dutch version

Back to outline 2019 Tax Plan

New box 1 rate system

A substantial decrease of wage and income tax rates will reduce the tax burden for citizens in the years to come. These rate adjustments will translate into a two bracket system effective 2021 with a base rate of 37.05% for box 1 incomes up to EUR 68,507, and a rate of 49.5% for higher incomes. The first step toward introduction of the two-bracket system will be made in 2019 by reducing the rates in the second and third wage and income tax brackets. The table below summarizes the changes for 2019.




Maximum first bracket

EUR 20,384

EUR 20,142

Maximum second bracket (born before 1 January 1946)

EUR 34,817

EUR 34,404

Maximum second bracket (born after 1 January 1946)

EUR 34,300

EUR 33,994

Maximum third bracket

EUR 68,507

EUR 68,507


Combined wage and income tax rates and national insurance contributions



Rate first bracket (under state pension age)



Rate first bracket (above state pension age)



Rate second bracket (under state pension age)



Rate second bracket (above state pension age)



Rate third bracket



Rate fourth bracket




Increase box 2 rate

From 2020 onwards, the rate for taxable income from a substantial interest (box 2) will be raised gradually to avoid the corporate income tax rate reduction having a magnet effect for private limited liability companies (BVs). This should maintain the global balance of the tax burden between entrepreneurs subject to income tax rules and shareholders of BVs. For 2020 a 1.25 percentage point box 2 rate hike up to 26.25% is envisaged. This will be followed by another 0,65 percentage point increase in 2021, so the eventual box 2 rate will be 26.9%. The effective rate increase is lower than provided for in the coalition agreement (28.5% in 2021). This resulted from the more limited reduction of corporate income tax rates than originally intended.

Debts of majority shareholder-director to private limited liability company

The government has announced it will come up with a regulation to discourage majority shareholder-directors to borrow from  their private limited liability companies amounts in excess of EUR 500,000. If the aggregate amount of the debts exceeds this threshold, the excess will be regarded as a dividend distribution that is taxable in box 2 as from 1 January 2022. A transitional measure will be implemented for existing debts in respect of the owner-occupied property.
The intended legislative change will not be part of the 2019 Tax Plan. Instead, it will only be presented to the House of Representatives in the spring of 2019. An internet consultation will take place first. The government has chosen to already announce the measure, so majority shareholder-directors will have as much time as possible to settle excessive debt ratios with their private limited liability companies, e.g., through dividend distributions. Any dividends majority shareholder-directors distribute in 2019 will still be subject to 25%. The box 2 rate will be raised to 26.25% in 2020.

Tax credits

To ensure lower income groups also benefit from the proposed tax break, the cap on the general tax credit will raise gradually in 2019, 2020 and 2021 up to EUR 2,753 (2018: EUR 2,265). Note that the existing income-related phase-out to nil in the second and third bracket will be maintained.

The cap of the employed person's tax credit will be up to EUR 3,945 in 2021 (2018: EUR 3,249). On top of that, the income qualifying for accrual of employed person's tax credit will be higher. However, this tax credit decreases by 6% (2018: 3.6%) for employment incomes over EUR 34,060.

The amount of the income-related combination credit will not be up. However, the accrual for this tax credit will be more gradual from 2019 and the cap will be reached at a lower income level.

From 2020 onwards, sickness benefits paid to unemployed persons will no longer be included in the amount of employed person’s tax credit and income-related combination credit. This brings about equal treatment with Unemployment Insurance Act beneficiaries, whose benefits do not qualify for the calculation of these tax credits either.

The table below reflects the changes in tax credits in 2019 compared with 2018:

Tax credits

Amount 2019

Amount 2018

Maximum general tax credit (under state pension age)

EUR 2,477

EUR 2,265

Maximum general tax credit (above state pension age)

EUR 1,268

EUR 1,157

Phase-out percentage general tax credit



Minimum general tax credit



Maximum employed person’s tax credit

EUR 3.399

EUR 3,249

Phase-out percentage employed person’s tax credit



Minimum employed person's tax credit



Maximum income-related combination credit

EUR 2,835

EUR 2,801

Young disabled person's tax credit

EUR 737

EUR 728

Elderly person's tax credit

EUR 1,596

EUR 1,418/
EUR 72

Phase-out percentage elderly person's tax credit



Single elderly person's tax credit

EUR 429

EUR 423


Maximum rate for deductible items

From 2020 onwards, the maximum rate of deductible items in box 1 will be reduced by 3 percentage points annually until the base rate of 37.05% is reached in 2023. Mortgage interest deduction is already being phased out, but this will be accelerated. The phase-out of the other deductible items in box 1 affected by the rate measure (entrepreneur’s allowance, SME profit exemption and personal deductible items) will start in 2020. The table below sets out the proposed adjustments (2018 figures included for comparison).








Maximum mortgage interest relief rate







Maximum rate other deductible items








The budgetary gain of accelerated phase-out of the mortgage interest relief rate will be used to reduce the percentage of the notional rental value for owner-occupiers in annual steps to 0.45% in 2023 for owner-occupied properties with a WOZ value between EUR 75,000 and EUR 1,060,000. The notional rental value for owner-occupiers will be maintained at 2.35% insofar as the WOZ value exceeds the latter amount. The reduction does not apply to the notional addition for private use of homes that are part of a company’s assets.

Protective assessment annuities and pensions

The legislature codifies a Dutch Supreme Court ruling of 2017, in which the highest court of the Netherlands judged that imposing a protective assessment relating to pension and annuity entitlements upon emigration may under certain circumstances constitute a breach of treaty faith. This concerns cases in which the applicable tax treaty provided for exclusive taxation in the state of residence, and

  • premiums for the annuity entitlement were paid before 1 January 1992, or in the period from 1 January 2001 up to and including 15 July 2009; or
  • entitlements and contributions to a pension scheme in the period prior to 16 July 2009 have not been included as wages.

The rationale is that the fair value of the respective entitlements was taxed in the Netherlands in the periods mentioned. The Netherlands thus in fact appropriated taxing powers that pertained to the treaty partner. Also, the premium deduction was not conditional in that period. Compartmentalisation should be applied when a protective assessment also relates to premiums which were paid in that period.

Extension of exemption for foster care allowances

A temporary exemption from income tax applies for foster care allowances granted for taking care of foster children. With this temporary exemption the legislature aims to avoid disputes as to whether this concerns a source of income. Pending an evaluation, it had already been decided to extend the exemption up to 1 January 2019. This evaluation indicates there may be reasons to introduce a permanent exemption, but this is yet to be decided. For the time being, the exemption is extended by another year up to 1 January 2020.

Limitation of 30% facility term

Effective 1 January 2019, the term of the so-called 30% facility for extraterritorial employees will be reduced from eight to five years. This shorter term also affects the possibility to opt for partial non-resident tax liability in income tax.
The reason for the legislative amendment is an evaluation of 30% facility which showed that about 80% of the applicants only use the facility for five years. The amendment also applies to existing cases. This means that employees who have received a decision with a termination date between 1 January 2019 and 1 January 2022 can no longer apply the 30% facility as from the first date. For decisions issued with a termination date after 1 January 2022, the term will effectively be reduced by three years. Transitional provisions apply for school fees paid to international schools.

See also: Announced adjustments to 2019 tax plans

Fixed notional addition for employer-provided bicycles

The use of bicycles for commuting will be encouraged as from 1 January 2020 by determining the value of the personal benefit of employer-provided bicycles based on a fixed sum. The tax step-up is set at 7% of the recommended consumer retail price.

Raising caps on tax exemption for volunteers

Volunteers can now receive a maximum payment of EUR 150 a month (capped at a maximum of EUR 1,500 a year) without liability for payroll taxes. The government proposes to raise this to EUR 170 a month and EUR 1,700 a year as of 1 January 2019.

Tax credit for non-resident taxpayers

The 2018 Tax Plan provided that as from 2019, only the tax component of tax credits to which non-qualifying non-resident taxpayers from the respective country are entitled is applied for wage tax purposes. This means that qualifying non-resident taxpayers will have to claim their entitlement to the tax component of non-work related income tax credits.

To align Dutch legislation with EU laws, the government now proposes to lay down that - where appropriate - non-qualifying non-resident taxpayers who are residents of an EU/EEA Member State are still entitled to the tax component of the employed person’s tax credit and the income-related combination credit in income tax.

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