You are here: Home / Archives for All Articles / News on personal tax

Proposed changes Dutch income tax rates 2021 and further

by

Proposed changes Dutch income tax rates 2021 and further

Income tax (box 1)
As per January 1st 2020, a two-bracket system was introduced for the personal income tax. The lowest tax bracket (up to an income of EUR 68.507) is taxed against a rate of 37,35%. The highest bracket (for an income exceeding EUR 68.507) is taxed against a rate of 49,50%. These tax rates apply for the fiscal year 2020.

The Government has announced that they will reduce the tax rate in the lowest bracket in stages. The tax rate in the highest bracket will remain 49,50%:

  2020 2021 2022 2023 2024
Bracket 1 37,35% 37,10% 37,07% 37,05% 37,03%
Bracket 2 49,50% 49,50% 49,50% 49,50% 49,50%

 

People entitled to an AOW pension do not pay any AOW premium. For that reason, the three-bracket system still applies to them:

 

  2020 2021 2022 2023 2024
Bracket 1 19,45% 19,20% 19,17% 19,15% 19,13%
Bracket 2 37,35% 37,10% 37,07% 37,05% 37,03%
Bracket 3 49,50% 49,50% 49,50% 49,50% 49,50%

 

Tax credits

  • As per 2021, the general tax credit (algemene heffingskorting) will be increased from EUR 2.711 to a maximum of EUR 2.837. This tax credit is income related;
  • As per 2021, the employed person’s tax credit (arbeidskorting) will be increased from EUR 3.819 to a maximum of EUR 4.205. This tax credit is income related;
  • As per 2021, the elderly person’s tax credit (ouderenkorting) will be increased from EUR 1.622 to a maximum of EUR 1.703;
  • As per 2021, the single elderly person’s tax credit (alleenstaande ouderenkorting) will be increased from EUR 436 to EUR 443;

 

Self-employed deduction

Last year, the Government already announced the phasing out of the self-employed deduction. This phasing out will be accelerated as from 2021. The current self-employed deduction of EUR 7.030 will be reduced with EUR 360 every year until 2027, after which the reduction will be EUR 110 every year until EUR 3.240 in 2036.

Income tax (box 3 = equity tax)

A legislative proposal has been submitted to increase the tax-free threshold in the context of the investment yield tax (box 3). The tax-free threshold previously was EUR 30.846 (2020), and will be EUR 50.000 in 2021. For fiscal partners this is EUR 100.000.

In order to be able to finance this higher tax-free threshold, the applicable tax rate in box 3 will be increased from 30% (2020) to 31% in 2021.

Because the tax rate of 31% is being calculated on a notional yield (and not on the actual realized yield), the effective tax burden in box 3 will be as follows:

 

Assets for an amount of to Effective tax burden
0 50.000 0
50.000 100.000 0,59%
100.000 1.000.000 1,40%
> 1.000.000   1,76%

 

Corporate income tax

Last year, the Government announced that the corporate income tax return would be lowered from 16,5% to 15% (low rate), and from 25% to 21,7% (high rate). These plans have slightly changed. As from 2021 the high rate will remain 25%. Also the bracket limits are changing:

 

  2020 2021 2022
Tax rate bracket 1 16,5% 15% 15%
Tax rate bracket 2 25% 25% 25%
Bracket limit EUR 200.000 EUR 245.000 EUR 395.000

 

AirBNB rental income taxed also in case only part of a home is let

by

AirBNB rental income is taxed also in case when only part of the main residence home is let. The awaited verdict of High Council (“Hoge Raad”) has recently followed. Whilst it was already clear that income from temporary renting through e.g. airbnb is taxed in case an entire main residence house or apartment is let, the lower courts were of the opinion that income from renting out parts of main residence apartments/houses could not be taxed.

It is now clear that the tax office is also allowed to tax income derived from temporary letting of parts of main residence apartments and houses. The taxation method is that 70% of the rental income (related expenses are deductible) is to be added to the deemed income of home ownership in box 1.

In case the house or apartment is not your main residence, it will most likely (if it is a so-called passive investment) fall into the equity tax system in which a deemed – and not the actual – rental income is taxed.

We can assist with the preparation of your personal income tax return as well as any other required tax, legal, accountancy related service.

 

 

 

Temporary interest measures tax authorities because of Covid-19

by

Temporary reduction of collection interest and tax interest

If you do not pay an assessment on time, you normally have to pay 4% recovery interest from the moment the payment term has expired. As of March 23, 2020, the tax authorities will temporarily reduce the collection interest from 4% to 0.01%. This applies to all tax debts.

The tax office charges tax interest if a tax return was not filed on time or was filed for an incorrect amount. The tax interest rate is 8% for corporate tax and 4% for other taxes. The tax office will also temporarily lower the tax interest rate to 0.01%.

This temporary measure will apply to all taxes subject to tax interest. The temporary reduction of the tax rate will take effect from 1 June 2020, except for income tax. For the income tax, the reduction will take effect from 1 July 2020.

The end date of the tax interest lowering is set on October 1st 2020. The interest will then increase back to 4%. Also the tax interest for the corporate income tax will increase to 4% instead of the previously applicable 8%, the 4% for corporate income tax will remain till the end of the year 2021. 

If you need any assistance with your tax return, we have been assisting both companies and private individuals for many years.

Deadline personal income tax return 2019 & be aware of interest

by

Deadline personal income tax return 2019 & be aware of interest. Now that the year has ended, it’s time to prepare for the Dutch personal income tax return 2019! The filing deadline for the Dutch personal income tax return 2019 is May 1st 2020. Here you can find the tax rates for 2019. 

In case you have to pay additional personal income tax on your personal income tax return 2019 be aware of the accruing interest (‘belastingrente’) on the amount on tax due following the 2019 personal income tax return. The tax office may start calculating interest in case your personal income tax return over tax year 2019 has been filed after May 1st 2020.

Since the interest rate as used by the tax office is fixed at 4% on annual basis, this interest rate is well above any interest percentage you may expect to receive on a Dutch bank current account / savings account.

Additional personal income tax may be due e.g. in case of savings held above the applicable thresholds or other taxable income which was not yet taxed, e.g. by means of wage tax and/or a preliminary tax assessment. Here you can find an explanation of the Dutch equity tax system.

Here you can find more information on the possibility to file tax returns retroactively going back for a maximum period of five years, be aware that tax deductions have to be made in the year the expenses were made. An example of a required retroactive filing is the deduction of study expenses in prior years, explained here.

Before filing a Dutch tax return, without having received an invitation from the Dutch tax office, it may be wise to check your Dutch tax residency status which is explained here.

Another possible reason to file your personal income tax return 2019 on time is that the tax authorities will reply (mostly by way of a personal income tax assessment 2019) more quickly. This could be especially interesting in case of an expected tax refund, e.g. in the year of migration (immigration or emigration).

We can assist with the full process to file your personal income tax return. If needed we can arrange for a lengthy filing extension of your personal income tax return 2019, however be aware that the possible interest calculation will not be extended by the tax authorities.

Some brief additional information on the Netherlands Dutch personal income tax system can be found here.

Annual indexation for 2020 minimum salary 30% ruling

by

Salary criterion –
A salary criterion is to be met to apply the 30% ruling, below is the annual indexation for the 2020 minimum salary to qualify for the 30% ruling. There are three qualifying salary groups:

1. Scientists do not have a salary minimum;

2. People below 30 years of age with a Masters education have a minimum salary requirement of EUR 29,149 (2020) / EUR 28,690 (2019) / EUR 28,350 (2018) excluding the 30% reimbursement and EUR 41,642 (2020) / EUR 40,985 (2019) / EUR 40,500 (2018) including the 30% reimbursement;

3. For Expats that do not match the groups under 1 and 2, a minimum salary requirement applies of EUR 38,347 (2020) / EUR 37,743 (2019) / EUR 37,296 (2018) excluding the 30% reimbursement and EUR 54,782 (2020) / EUR 53,918 (2019) / EUR 53,280 (2018) including the 30% reimbursement.

Please note that these minimum amounts are subject to annual indexation. In principle the salary criterion may not be decreased pro rata in case of a part time employment. There is an exemption on this rule in case of parental leave.

The salary criterion in principle replaces the prior criterion of required specific skills, in that sense the ruling has become more accessible. Please note however that the salary criterion is a continuous test, the employer is therefore held to continuously check whether all requirements are still met by its employee.

Here you can find full details on all criteria to be met in order to qualify for the 30%-ruling.

We can assist with the full process of obtaining the 30%-ruling, please contact us.

Social security international employees; where are you insured?

by

Social security international employees; where are you insured?

When you work as an employee or self-employed person in several countries at the same time, it is sometimes difficult to determine in which country you are socially insured and therefore which country is entitled to levy when it comes to social security contributions. The Dutch social premiums are the AOW, Anw and Wlz (national insurance schemes) and the WW, WAO, WIA and ZW (employee insurance schemes).

In order to ensure that several countries do not claim to be entitled to levy premiums, European Union Regulation 883/2004 on the coordination of social security systems has been created. The Regulation contains designation rules that assign the levy rights to only one country in cross-border situations. Please note: the Regulation only applies to EU member states.

Article 11 of the Regulation provides that the country of employment (ie the country in which the work takes place) may in principle levy social contributions. So if you live in the Netherlands but you work in Germany, then according to the Regulation you are obliged to hand over social contributions to Germany (you can never be obliged to do so to in two countries).

Do you perform work in 2 or more Member States for 1 employer? Then Article 13 of the Regulation applies. The rules are as follows:
If you perform 25% or more of the activities in the Member State in which you live, this Member State is entitled to tax.
If you perform less than 25% of the work in the Member State in which you live, then the Member State is entitled to tax where your employer is based, or where your employer is established.

Do you perform work in 2 or more Member States for 2 or more different employers? In this case the following rules apply:
If the 2 employers are located in the same Member State, this Member State is entitled to tax;
If employers are located in 2 different Member States, 1 of which is the Member State where you live, the other Member State is taxable;
If the employers are located in at least 2 different Member States, not being the Member State where you live, the Member State where you live is taxable.

Interesting is the concept of employer that has always been formally explained for the application of the Regulation. From the above rules it emerges, as soon as one does not perform at least 25% of the work in the country of residence and there is 1 employer (this is often the case) that the country where the employer is established is entitled to tax. Consider, for example, professions within professional goods transport, where many borders are crossed and along which they are en route.

A formal explanation of the term employer is about the location on paper. The registered office is usually looked at (in which country is the employer registered). It does not seem incomprehensible that such a formal approach encourages fraudulent arrangements whereby a paper employer is established in a certain country, but actually operates from another country.

On 26 November 2019 the Court of Justice of the European Union decided in a judgment to drastically change this interpretation. In the judgment, the Court answers questions referred for a preliminary ruling by the CRvB (Centrale Raad van Beroep).
There has long been a tendency within jurisprudence towards a more material interpretation of the concept of employer within social security, but this has never been pronounced by the Court.

The present case concerned an Cypriot employer. This Cypriot employer employs many truck drivers who thus have a paper based employer in Cyprus. Social security contributions in Cyprus are considerably lower than in the Netherlands. This goes hand in hand with a poorly functioning social safety net. If you suddenly become incapacitated for work, you can to a lesser extent count on a decent benefit.

The actual situation between the truck drivers and the Cypriot employer was that the truck drivers were fully available to companies established in the Netherlands for an indefinite period of time and that they also exercised actual authority over them. The Court has therefore ruled that the employer is “who has recruited the persons concerned, who in fact has them fully available for an indefinite period of time, who exercises the actual authority over them and who de facto bears their wage costs”.

This way, structures that have nothing to do with reality are avoided and you as an employee or self-employed person are also protected against a weak social safety net.