Dutch Budget Announcements for 2016
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On 15 September, the day of the opening of the Dutch Parliament (Prinsjesdag), the Dutch Government announced its plans for the year 2016 and beyond. They aim to reduce the tax burden on tax payers and to stimulate economic growth by encouraging employment and spending. The issues most relevant to Dutch employers are as follows:- Adjustments to tax bands and rates:
|
Tax bands |
Proposed new rates for 2016 |
| Up to EUR 19 922 | 36.5% (8.4 % tax + 28.15% national insurance) |
| EUR 19 922 – EUR 33 715 | 40.15% (12% tax + 28.15% national insurance) |
| EUR 33 715 – EUR 66 421 | 40.15% (tax only) |
| Over EUR 66 421 | 52% (tax only) |
- These represent reduced tax rates for most Dutch tax payers.
- Adjustments to various tax credits were also announced.
- The taxation scheme for work-related expenses (‘werkkostenregeling’ or WKR) which became compulsory to all employers as of 1 January 2015 has been clarified to tighten the ‘customary test’ regarding which items can qualify as being exempt from wage tax. An employer must show that it is normal practice to grant the net benefit but also whether is it customary to bring it under the employer tax of the work-related expenses scheme.
- R&D deduction in corporate income tax will be integrated into existing R&D incentives under wage taxes. From 2016 they will be available to cover all R&D costs (labour, corporate and expenses), and will fall into two brackets at 32% (40% for start up companies over the first EUR 350 000 expenses) and 16% for costs exceeding EUR 350 000. There is no cap on this second bracket.
From 2017 the following will apply:
- Notional return on savings and investments (‘box 3‘) will be taxed on progressive rates of return (where currently a flat 4% return is assumed on the total assets) and a deemed ratio between savings and other investments. The notional return on savings will reduce but the return on other investments over EUR 100 000 will go up. With effect from 2017 the notional average return on investment will vary between 2.9% and 5.5%. The tax rate on an assumed return will remain 30%.
- Only electronic filing of tax returns of personal income tax returns will be permitted. For non-Dutch residents this rule will be relaxed.
- The current gift tax exemptions from parent to child will be extended to apply on gifts between any individuals. There will be higher gift tax exemptions where the gift is made to individuals between the ages of 18-40 for financing their principal home. These will be up to EUR 100 000 (for one time use) but the exemption for gifts to children in 2016 will be capped at EUR 53 016.
- Rebates will be available to employers hiring employees with a relatively low salary.
Who is impacted by these changes?
Individuals
- Many Dutch tax payers will have a lower overall tax liability.
- Those in employment earning less than approx. EUR 50 000 will receive a higher labour tax credit.
- Higher earners will receive no labour tax credit, but the marginal tax rate of 52% will kick in at a substantially higher income level (EUR 66 421 rather than EUR 57 585).N.B. The marginal tax rate for expat employees enjoying the 30%-ruling remains the same.
- Those who can benefit from gift tax exemption.
Employers in the Netherlands
- Employers will benefit from the revised R&D incentive which will reward innovation in technical scientific research and the development of new products, production processes and programs).