Tax Plan 2021 - Senate approves Tax Plan 2021 package

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Tax Plan 2021 - Senate approves Tax Plan 2021 package

On 15 December 2020, the Senate approved the 2021 Tax Plan package, the limitation of the liquidation loss scheme in corporate income tax and the introduction of an air passenger tax. This greenlights a number of much discussed Government measures.

23 December 2020

Tax Plan 2021

On 15 December 2020, the Senate approved the 2021 Tax Plan package and the limitation of the cessation and liquidation loss scheme in corporate income tax. During the parliamentary debate on these legislative proposals in the Senate, the Government made another important adjustment to the job-related investment credit (BIK). For the time being, an amending Act to the Tax Plan 2021 provides that the BIK cannot be applied for on behalf of a fiscal unity for corporate income tax purposes, but only at the level of individual companies. This rule was introduced because of the risk that the scheme may conflict with the freedom of establishment. In order to ensure that the proposed scheme can be limited to domestic investments, a notification procedure has been initiated with the European Commission. If approved by the Commission, a BIK application at fiscal unity level will still be possible with retroactive effect from 1 January 2021. If the European Commission's response is negative, the Government expects that a quarter of the planned investments will no longer be eligible. In that case the rates of the BIK will be increased to 5% (instead of 3.9%) and 2.08% (instead of 1.8%).

Air passenger tax

On 15 December 2020, the Senate also approved the introduction of a unilateral air passenger tax on 1 January 2021. This tax will be levied from airport operators. The rate is EUR 7.845 (adjusted for inflation) for each passenger departing from an airport in the Netherlands. Transfer passengers and children under the age of two are exempt. The previously anticipated cargo tax has been abolished, after research showed that it would greatly distort the competitiveness of the smaller Dutch airports.

Tax rates 2021

The following is an overview of the most important tax rates and exemptions for 2021.

Corporate income tax rates

In 2021, the corporate tax rate will be 15% (2020: 16.5%) up to a taxable amount of EUR 245,000 (2020: EUR 200,000) and 25% on the excess. In 2022, the first tax bracket will be extended to EUR 395,000. The rate for the innovation box will be increased to 9% in 2021, up from 7%. The table below summarises the changes:

Year 2020 2021 2022
Step-up rate
16,5%
(taxable amount up to € 200.000)
15%
(taxable amount up to  € 245.000)
15%
(taxable amount up to  € 395.000)
Headline rate                
25%
(taxable amount from
€ 200.000)
25%
(taxable amount from
€ 245.000)
25% 
(taxable amount from
€ 395.000)

 

Withholding tax and dividend withholding tax

The rate of the conditional withholding tax on interest and royalty payments, which will enter into force on 1 January 2021, will be 25%. The rate of dividend withholding tax will remain 15% in 2021.


Income tax rates

Rate box 1

The income tax rates in box 1 for taxpayers who were born on or after 1 January 1946 and have not yet reached the state pension age will be as follows in 2021:

Box 1 income over
but under
Tax rate
National insurance contributions rate
Total
- € 35.129 9,45% 27,65% 37,10%
€ 35.129 € 68.507 37,10% - 37,10%
€ 68.507 - 49,50% - 49,50%


The income tax rates in box 1 for taxpayers born on or after 1 January 1946 who have reached the state pension age will be as follows in 2021:

Box 1 income over   but under
Tax rate
National insurance contributions rate
Total
- € 35.129 9,45% 9,75% 19,20%
€ 35.129 € 68.507 37,10% - 37,10%
€ 68.507 - 49,50% - 49,50%


The income tax rates in box 1 for taxpayers born before 1 January 1946 will be as follows in 2021:

Box 1 income over
but under
Tax rate
National insurance contributions rate
Total
- € 35.941 9,45% 9,75% 19,20%
€ 35.941 € 68.507 37,10% - 37,10%
€ 68.507 - 49,50% - 49,50%

 

The maximum deduction rate for certain tax allowances in box 1, such as mortgage interest relief, entrepreneur's allowance, SME profit exemption and personal deductible items will fall to 43% in 2021. The tax allowance will remain in place, but in certain cases a rate correction will be applied when calculating the income tax due.


Rate box 2

The rate in box 2 (income from substantial interest) will be increased to 26.90% in 2021 (2020: 26.25%). This rate increase was already provided for in the Tax Plan 2019.


Rate box 3

As of 1 January 2021, the tax-free allowance in box 3 will be increased to EUR 50,000 per taxpayer (2020: EUR 30,846). Conversely, the box 3 rate will be increased to 31% (2020: 30%). In addition, the bracket limits for the classification into yield classes will be redefined. Also in 2021, the legislator will continue to use fictions with regard to the composition of the box 3 capital. See the table below: 

Savings and investment base
Yield class I
Yield class II Notional yield
€ 0 - € 50.000 67% 33% 1,90%
€ 50.000 - € 950.000 21% 79% 4,50%
>€ 950.000 0% 100% 5,69%

 

Social security contributions

  • National insurance contribution rates will remain the same in 2021 compared to 2020, at 17.90% (AOW, Occupational Disability Insurance Act), 0.10% (ANW, Surviving Dependants Act), and 9.65% (WLZ, Long-Term Care Act) respectively.
  • The rate of the income-related employer-paid ZVW (Healthcare Insurance Act) contribution is 7.0% in 2021. The income-related ZVW contribution will be lower for persons subject to compulsory insurance who benefit from these other income components: the rate applicable to them is 5.75%. The maximum contribution income in 2021 will be EUR 58,311 in both situations.
  • The Basic Contribution for the Invalidity Insurance Fund (AO) has been set at 7.03% for 2021.
  • The low contribution for the General Unemployment Fund (AW) will be 2.7% and the high contribution will be 7.7% in 2021.

Transfer tax

Effective from 1 January 2021, a one-off exemption from transfer tax will apply for first-time home buyers between 18 and 35 years of age. Effective from 1 April 2021, however, this exemption will no longer apply if the value of the home (including appurtenances) exceeds EUR 400,000. A 2% reduced rate will apply for home-owners moving property who acquire a home for their own use after 1 January 2021. In order to benefit from the first-time buyers’ exemption or the reduced rate of 2%, the home must serve as a main residence. The 2% rate also applies to housing associations that purchase homes from housing corporations. All other acquisitions will be taxed at the general rate, which will be 8% effective from 1 January 2021 (2020: 6%).

Rates and exemptions for gift and inheritance tax

The rate of gift and inheritance tax depends on the kinship to the person from whom the gift is obtained. For acquisitions (gift or inheritance) by the partner or a child, the rate is 10% up to an acquisition of EUR 128,751 and 20% over the excess. For acquisitions by a grandchild these rates are 18% and 36%, respectively. For other acquirers the rates are 30% and 40%, respectively.
Parents can make annual donations to their children within certain limits without having to pay gift tax. In 2020, EUR 5,515 per child can be donated tax-free. For other recipients, an exemption of EUR 2,208 will apply in 2020. The House of Representatives has adopted an amendment to the Tax Plan 2021 that provides for a one-off increase in both exemptions by EUR 1,000 in 2021. Adjusted for inflation, these exemptions will be EUR 6,604 and EUR 3,244, respectively, in 2021.

If a child is between 18 and 40 years old, a one-off tax-free donation of EUR 26,881 may be made in 2021. If the donation is meant to fund expensive studies, the one-off increased exemption is EUR 55,996. In 2021, the one-off increased exemption for donations to be spent on one’s own home will amount to EUR 105,302. The latter exemption is not limited to donations from parents to children. However, it is subject to the requirement that the donees should be between 18 and 40 years of age. For all one-off increased exemptions, this must be explicitly invoked in the gift tax return.

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