2025 Tax Plan: more balanced income distribution and healthy public finances

News item | 17-09-2024 | 15:15

Supporting purchasing power and socioeconomic security

This government is introducing the following measures to improve the purchasing power of people on middle incomes and various vulnerable groups. The rate payable in the first income tax band on income of up to €38,441 per year will be reduced to 35.82%. A new second tax bracket will be introduced, with a rate of 37.48% applicable to income of between €38,441 and €76,817 per year. As a result, working people and people receiving the general old age pension will be left with more money after tax in 2025.

People will also benefit from the reduction in energy tax on natural gas, as a consequence of which everyone will pay €29 less in tax in 2025. The current reduction in excise duties on petrol, diesel and LPG (in Dutch) will be extended by one year and these duties will not be adjusted for inflation. The duties (per litre) will remain at 79 cents for petrol, 52 cents for diesel and 19 cents for LPG, just as in 2024.

In addition the government will be taking further measures to support people on low incomes, such as increasing housing benefit and supplementary child benefit.

Improvements to the tax system

The process of making improvements to the tax system will continue under this Tax Plan as well. The government is taking a number of measures in response to assessments that have shown that certain schemes no longer serve their intended purpose, or do not so do efficiently. As of 2025, there will no longer be any need for complicated calculations in tax returns when deducting additional transport costs arising from illness or incapacity. For visits to a doctor, hospital or pharmacy, a fixed amount of 23 cents per kilometre will become deductible. People who incur additional transport costs on account of a serious illness or a disability will also be able to deduct a fixed amount of €925. It will no longer be necessary to keep receipts for example for fuel, insurance or adaptations to vehicles. Travel expenses for journeys made by taxi or public transport will also continue to be deductible based on the costs actually incurred.

There will be amendments to the rules applicable under the business succession scheme (BOR) and the deferral scheme for a director-major shareholder passing on a substantial interest in a business (DSR ab). These amendments will simplify the schemes. As of 1 January 2025 the period for which the donor must have possessed a substantial interest and for which the recipient must retain the interest and continue the business will be reduced from five to three years, which means that business owners will have greater flexibility at an earlier stage without losing the right to benefit from the BOR scheme. As of 1 January 2026 access to the BOR and DSR schemes will be restricted to those holding ordinary shares representing a stake of at least 5%. In addition, action will be taken to counter misuse of the BOR through arrangements where an older relative buys into a business mainly to reduce the inheritance tax payable by the intended heir and cases where double use is made of the BOR. 

Furthermore, as of 2026 the reduced VAT rates for providing accommodation and for certain cultural goods and services are being abolished. Consequently, with effect from 1 January 2026 the general rate of 21% will apply. Sports associations are excluded from this measure and compensation will be provided for teaching materials for schoolchildren up the age of 18. 

As of 2025, the deduction for donations made by businesses will be abolished. Donations will no longer be deductible for the purposes of corporation tax. In addition, the rules on ‘donations by the company’ (under which donations made by a company were not regarded as profit distribution) are being scrapped, which means that as of 2025 such donations will once again be regarded as profit distributions and subject to tax. Sponsoring and advertising are business expenses that will remain deductible.

Undesirable tax avoidance practices will also be tackled, such as arrangements used in real estate transactions to circumvent the VAT that is intended to be payable. 

In order to boost the housing market, the general rate of transfer tax on homes that are not classed as primary residences is being reduced from 10.4% to 8% in 2026.

An attractive business climate

The government wants the Netherlands to remain an attractive place for companies to locate, grow and attract the skilled personnel that they require. Having a strong competitive position and predictable tax policy are important priorities in this connection, enabling companies to plan for the long term. The planned scaling back of the tax deduction for ‘expat’ employees will be partially reversed as of 2027: a 27% deduction will be allowed for a period of five years. The general qualifying salary under the scheme will be raised from €46,107 to €50,436. The qualifying salary for employees aged under 30 with a master’s degree will also be raised. The dividend tax share buyback facility for listed companies will also continue to exist, exempting such companies from dividend tax on purchases of their own shares subject to certain conditions. We will also be raising the general limit on interest deduction for corporation tax purposes from 20% to 25%, bringer it closer into line with the European average. In addition we will be relaxing the rules on the exemption for profits arising from debt waivers for corporation tax where a company has losses in excess of €1 million. This will make it easier for businesses that are essentially healthy to reach an agreement with their creditors.

Keeping the public finances healthy

This government regards healthy public finances as crucial and will be implementing a number of measures set out in the framework coalition agreement and additional measures to absorb a number of financial setbacks. For example, we will increase the tax on games of chance in two steps, to 34.2% in 2025 and 37.8% in 2026. This is the tax that people pay on winnings of more than €449 from a lottery or casino in the Netherlands. We will be scrapping the reduction in the box 3 rate – as planned in the framework coalition agreement - (applicable to income from savings and investments), which will therefore remain at 36%. The net metering scheme for small-scale users of solar panels will be abolished as of 2027, which means that owners of solar panels will no longer be able to offset the electricity that they return to the grid against the electricity that they purchase. Employers will pay a higher general unemployment fund (AWF) and invalidity insurance fund (AOF) contribution for their employees. Various groups will thus be asked to make a contribution.

Box 3

In addition to the measures in the Tax Plan, the government has also taken a decision on who will be eligible for additional compensation in response to the Supreme Court’s judgment of 6 June 2024 regarding box 3. It has been decided that the target group for compensation will be broad. All taxpayers who have (or have had) an assessment imposed subsequent to what has become known as the Supreme Court’s ‘Christmas judgment’ of 24 December 2021 can file the ‘actual return’ form if their actual return was lower than the assumed flat-rate return. Taxpayers who received assessments in the years 2019 and 2020 are required to submit a request for automatic reduction before the five-year time limit expires. Taxpayers with a 2019 assessment must submit their request by the end of this year, while those with a 2020 assessment have until the end of 2025 to do so. Taxpayers with an assessment from 2017 or 2018 must already have submitted a request for automatic reduction in order to make use of the form.

The Supreme Court held that the actual return should be determined on the basis of the taxpayer’s entire box 3 capital, taking into account both direct and indirect returns, and without deducting the capital yield tax allowance. The government will adhere to this definition of actual return.