Tax Plan 2021 - House of Representatives has adopted the Tax Plan 2021 has been saved
Tax Plan 2021 - House of Representatives has adopted the Tax Plan 2021
On 12 November 2020, the House of Representatives agreed to the Tax Plan 2021 package and a bill providing for a limitation of the liquidation loss regime in corporate income tax.
16 November 2020
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- Job-related Investment Credit (“BIK”)
- First-time buyers and home-owners moving property on the housing market
- Temporary increase in gift tax exemptions
- Replacement of Rose of Postal Codes Scheme by a subsidy scheme
On 12 November 2020, the House of Representatives agreed to the Tax Plan 2021 package, which had been submitted on Budget Day. It includes the following legislative proposals:
- Tax Plan 2021
- Other Tax Measures 2021
- Box 3 Adjustment Act
- Transfer Tax Differentiation Act
- Implementation of Allowances Improvement Act
- Industrial CO2 Tax Act
- 2021 and 2022 rates Surcharge for Sustainable Energy
- One-off rent reduction for low-income tenants
The House of Representatives also adopted a bill limiting the cessation and liquidation loss regime in corporate income tax. A number of amendments to the Tax Plan 2021 and the Transfer Tax Differentiation Act were adopted, which we will discuss below.
Job-related Investment Credit (“BIK”)
The BIK is intended to stimulate new investments in previously unused business assets and applies to investment commitments entered into on or after 1 October 2020. Manufacturing costs and expenditures for improving existing business assets do not qualify for the scheme. An additional condition is that the investments involved must be fully paid for during the period from 1 January 2021 through 31 December 2022 and put into use within six months of that full payment at the latest. The BIK’s design is that of a wage tax remittance reduction. The government had proposed a 3% credit up to a EUR 5,000,000 investment level and 2.44% over the excess. The House of Representatives, however, wanted a greater share of the available budget to benefit SMEs. The amendment it has adopted changes the above percentages to 3.9% and 1.8%, respectively.
First-time buyers and home-owners moving property on the housing market
The government wants to increase the possibilities for first-time buyers on the housing market and home-owners moving property moving property. To this end, a one-off exemption from transfer tax will be introduced for first-time buyers between 18 and 35 years of age who buy their first home effective from 1 January 2021. The exemption had initially been set to apply until 1 January 2026, but an amendment adopted by the House of Representatives abolishes this sunset clause. Under a second change, the exemption no longer applies if the home value (including appurtenances) exceeds EUR 400,000. This comes into effect on 1 April 2021.
Home-owners moving property who acquire a home for their own use effective from 1 January 2021, can continue to claim the 2% reduced rate. Both for application of the first-time buyer exemption and the reduced rate, the home must serve as a main residence other than temporarily. The acquirer must state this clearly, firmly and unreservedly. This written statement forms part of the transfer tax return. The House of Representatives adopted an amendment to the effect that the 2% rate will also apply to housing cooperatives that purchase housing from housing corporations.
All other acquisitions will be taxed at the general rate, which will be increased to 8% on 1 January 2021.
Temporary increase in gift tax exemptions
The levy of gift tax includes various exemptions. Under one of those exemptions, parents can make donations to their children every year. Provided they stay within certain limits, they can make such donations without being liable to gift tax. In 2020, EUR 5,515 per child can be donated tax-free. Other acquirers are entitled to a EUR 2,208 exemption in 2020. The House of Representatives has adopted an amendment to the Tax Plan 2021, implementing a EUR 1,000 one-off increase of both exemptions in 2021. Factoring in inflation adjustment, the above exemptions are expected to amount to EUR 6,604 and EUR 3,244 respectively in 2021. The House of Representatives' wish to provide entrepreneurs with more options to obtain cash in these difficult times has prompted the increase.
Replacement of Rose of Postal Codes Scheme by a subsidy scheme
The so-called Rose of Postal Codes Scheme in the energy tax will be replaced by a subsidy scheme. Like in the current scheme, the postal code area will be used to ensure the local character. The subsidy will be paid to a cooperative association or owners’ association. The project participants must be members of this cooperative association or owners’ association and, at the start, live in the same postal code area as where the electricity connection to the production plant is located. Originally, the Rose of Postal Codes Scheme had been set to end on 1 January 2021. But, because the new subsidy scheme will not be available until 1 April 2021, an amendment has been adopted to postpone that date to 1 April 2021.