We would like to inform you about the latest tax changes and saving opportunities with this end-of-year newsletter. We hope you will benefit from this newsletter. Please contact our office for more information and personal advice. We have distinguished our tips and hints between private and business. Please go ahead and read what applies to your situation!

With kind regards,

J.C. Suurmond & zn. Tax consultants

Trusted advisors since 1986

Untaxing taxes!

Tax Plan Summary

This is the first budget of the new Rutte IV government, which, as expected, incorporates many of the plans in the coalition agreement. In addition, a number of changes from the ‘Voorjaarsnota’ (Spring Memorandum) have been included in response to budgetary challenges due to, amongst others, the consequences of the war in Ukraine and the Supreme Court decision for box 3.

The box 1 Income Tax is reduced slightly. This is offset by a number of other increases in, for example, the property transfer tax and Box 3 levy for second homes. Corporate income tax for Ltd’s will also be increased, reversing earlier cuts. There has been much talk this year about the box 3 levy following the Supreme Court’s Christmas ruling with significant implications for the way it is levied. You can read more about it below, both about the corrections over previous years and what the situation looks like from now on.

A selection of some tips before the end of this year:

– If you still want to make use of the increased gift exemption of €100,000 for your child’s own home, this is possible until 31-12-2022 at the latest. Under certain conditions it is possible to spread the actual payment over 2022 and 2023.

– The new box 3 levy is based on different asset categories; you could possibly take advantage of this by adjusting the composition of your assets before 31 December. This could include, for example, converting low-yielding investments or loans (receivables) that are currently taxed at the highest rate to low-taxed savings.

– For 2023, the rate of income tax deductions for higher-income earners will again be reduced with 3%; if it is possible to bring deductible expenses forward, the deduction will yield more this year.

Index individuals tax tips:

• Changes box 1 Tax – Income from work and first-residence property
• Supreme Court ruling and corrections box 3 levy
• ‘Mass appeal’  for non-objectors box 3 tax
• Box 3 calculation – levy on foreign property
• Changes 2023 Box 3 – Benefit from savings and investments
• Limitation to shifting between box 3 categories
• Reduction in the rate of deductible items for higher incomes
• Limitation of 30% ruling for high wage earners
• Increasing taxation on second property
• Last chance for high tax-free gift ‘jubelton’
• Replacement deduction for training costs
• Other tax tips

Index business tax tips:

• Change in corporate tax
• Change in box 2 tax- income from substantial shareholdings
• Tax-free allowances employees
• Tax free scheme
• Termination of efficiency margin for usual wage
• Restriction on borrowing from own company
• Loss relief corporate income
• Bills to prevent tax avoidance for international companies
• UBO register temporarily out of public access
• Other tax tips

Individuals tax tips

Changes Box 1 Tax – Income from work and first-residence property

In 2023, the rate in the first bracket will be reduced from 37,07% to 36,93%. The threshold for the first bracket has also been raised this year, from €  69.398 to € 73.071. The rate for the second bracket remains 49,50%.

Income Tax – AOW not reached	2022	Income Tax – AOW not reached	2023
First bracket up to € 69.398	37,07%	First bracket up to € 73.071	36,93%
Second bracket from € 69.398	49,50%	Second bracket from € 73.071	49,50%

A three-bracket system still applies to taxpayers who have reached the state pension age. Disc 1 goes from 19,17% to 19,03%. The second bracket goes from 37,07% to 36,93% and the third bracket remains 49,50%.

Income Tax – AOW reached	2022	Income Tax – AOW reached	2023
First bracket up to € 35.472	19,17%	First bracket up to  € 37.149	19,03%
Second bracket: € 35.472 – € 69.398	37,07%	Second bracket:  € 37.149 – € 73.071	36,93%
Third bracket from € 69.398	49,50%	Third bracket from € 73.071	49,50%
*other brackets apply to people born before 1 January 1946

For box 2 rates, please refer to the business section of the newsletter.

Supreme Court ruling and corrections box 3 levy

Legal proceedings have been going on for years about the fictitious way of levying tax on the box 3 capital. After all, a fictitious return was assumed that was many times higher than that received on the savings account. The rulings for previous years however all turned out negatively for taxpayers. Ultimately, however, the Supreme Court ruled last December that the fictitious calculation of box 3 for the years 2017 and 2018 can be disproportionately burdensome and therefore in violation of the human rights treaty. According to the Supreme Court, legal redress must be offered to taxpayers who have objected.

The Tax Office has worked out this correction of taxes by taking into account the actual composition of their assets and not the fictitious progressive rates. A fictitious return is still assumed; the return on savings has been sharply reduced to 0,25% or less based on actual interest rates. However, the highest percentage of around 5,5% applies to all other assets. A lower percentage of around 3% applies to debts. The tax-free allowance is calculated at a weighted average rate. In any case, generally this will provide a better connection to the actual wealth situation. Since the fictitious return on other capital is calculated based on the highest percentage, the new calculation is not necessarily more favourable in all situations. However, if this turns out to be less favourable, the existing box 3 calculation will remain in effect. From 2023, only the new system will be applicable.

Below is an overview of the old box 3 tax system in 2022.

‘Mass appeal’ proceedings for non-objectors box 3 tax

It was announced on the 4^th November that a supplementary procedure, ‘massaal bezwaar plus’, will be set up for non-objectors. If it follows from this appeal procedure that non-objectors are eligible for legal redress, this restoration will take place in the same way as for objectors. Taxpayers will then no longer have to make an individual request. By doing so, the Tax Office wants to prevent large numbers of appeals being filed again. This mass appeal procedure specifically is for those who did not timely submit an appeal. If you have lodged an appeal, but still do not agree with the outcome for other reasons, we recommend you do submit a request. This may concern, for example, the allocation between partners or the calculation of the levy on foreign property. For the year 2017, this request will have to be submitted before the end of 2022. For more details about this, please contact our office. If you have any questions about this, please contact our office.

Box 3 calculation – levy on foreign property

Incidentally, there are some ambiguities regarding the calculation of the double taxation deduction on foreign real estate. In our view, the deduction was calculated in an unfavourable way, assuming the average rate instead of the high rate applied to real estate. The Tax Office has since started correcting the previous deductions itself. In addition, the choice between the old or the new system is also not unambiguous in situations involving double taxation deductions. We recommend checking these cases extra carefully and raising an appeal if necessary.

Changes 2023 Box 3 – Benefit from savings and investments

From 2023, the new box 3-system will apply. Under this system, the categories of savings, other assets and debt each have their own percentage of notional return. In 2023, the tax-free wealth will be increased to around € 57.000 (€ 114.000 for tax partners). Based on the asset mix, an average return is calculated on the total assets. The rate on the notional return in box 3 will be 31% in 2022. This rate will be gradually increased annually by 1% to 33% in 2024, thus reaching 32% in 2023.

It is planned to introduce a tax system based on actual returns and capital gains by 2026. This follows the Supreme Court’s ruling on the notional return; however, in practice, there are many snags in any system. Consequently, much is still unclear about the new box 3 tax, and it remains to be seen whether it will actually be introduced in 2026.

Limitation to shifting between box 3 categories 

Under the new system of box 3 taxation, savings are taxed more favourably than other assets. To prevent taxpayers from shifting their assets between the different asset categories just around the tax reference date for box 3, a provision has been included in the Box 3 Bridging Act. If a transaction falls within a three-month period around January 1, it is ignored for the purpose of calculating the box 3 tax on 1 January. Therefore, due to this provision, temporarily converting assets does not result in lower taxation. If the conversion, for example from investments to savings, was more than three months ago at the time this conversion is reversed, it does not fall under the reference date arbitrage limitation. If the transaction is not for tax reasons then this also does not fall under the reference date arbitrage; for this, the tax authorities can request documentary evidence to establish this. The first reference date of the new system is 1-1-2023.

Shifting between asset categories around the reference date of 1 January is therefore, in principle, only successful if the shift is maintained for three months. Of course, costs of transferring securities and other assets should also be taken into account. Do you have any questions about this arrangement? If so, please contact us.

Reduction in the rate of deductible items for higher incomes

As already mentioned in 2020 and 2021, the highest rate at which virtually all deductible items are to be deducted is gradually being decreased. It can therefore be advantageous to bring forward deductible costs where possible. Taxpayers whose income falls in the highest bracket in box 1 will gradually have less tax advantage from these deductible items. In 2023, these deductible items may be deducted at a maximum of 36,93%, compared to 40% in 2022.

This concerns the following deductions:

• Alimony
• Deduction of study costs
• Deduction of expenses for specific healthcare costs
• Deduction of weekend expenses for disabled
• Gift deduction
• Mortgage interest deduction
• Entrepreneurial deduction (self-employer’s deduction, research and development deduction, cooperation deduction, starter’s deduction in the event of incapacity for work, discontinuation deduction)
• Profit exemption for small and medium sized businesses

Due to this reduction, the deductible items will yield more in 2021 than in 2022 and the following years. If your income falls in the highest tax bracket in 2021, it is therefore advisable, if possible, to pay deductible items such as gifts or healthcare costs before the end of the year.

Limitation of 30% ruling for high wage earners

The 30% rule for incoming employees will be limited to the WNT norm(also known as the Balkenende norm) from 1 January 2024. In 2022, this norm will be €216.000 on an annual basis and in 2023 €223.000. There is a transitional arrangement for incoming employees for whom the 30% rule was applied over the last pay period (December) of 2022. For existing 30%-ruling cases the capping of the 30% rule only applies from 1 January 2026, instead of 1 January 2024. So if you were planning to hire an incoming employee with a salary above the WNT norm early next year, the employee will benefit from an additional two year if the employment starts already as of 1 December 2022. Please contact us for advice on the possibilities.

Increasing taxation on second property

From 1 January 2023 the property transfer tax when buying a second property, will be raised to 10,4%. Until now this rate was 8%. Furthermore from 2023 onwards the correction that was possible based on the rental status of a second property will be limited. Whereas until 2022 the value could be reduced to 45% of the WOZ-value, from 2023 onwards this will be a maximum of 73%. If you would like to know how this will work out in your situation please contact our office.

Last chance for high tax-free gift ‘jubelton’

In 2022 it is your last opportunity to donate the so-called ‘jubelton’ of € 106.671 to your child or anyone other person tax-free. The condition is that the receiver spends this amount on an own home within 3 calendar years and that he or she is between 18 and 40 years old on the date of the gift. From 2023, this exemption will only be €37.231.

The general annual gift exemptions are yet available to be made use of this year. Please note that the money must be credited to the recipient’s account by December 31, 2022 at the latest. There is a general exemption of € 2.274. An exemption of € 5.677 applies to gifts to children. In addition, there are a number of one-off gift exemptions (for example, for a study or the purchase of a primary residence). If you have any questions regarding these exemptions, we will be happy to assist you.

Replacement deduction for study costs

From tax year 2022 onward, study costs are no longer deductible from the income tax. The tax deduction will be replaced by the STAP budget subsidy scheme (Incentive for the Labor Market Position). This budget will apply to people with a link to the Dutch labour market. From 1 March 2022, workers and job seekers can apply for a STAP budget at the UWV. This is possible per person once a year. The budget is €1.000 per person per year. If the application is approved, the amount is paid to the trainer. Only study costs paid until 2021 can still be deducted in the Income tax returns.

Other tax tips

• Do you expect to pay tax for the 2022 or 2023 tax year? Requesting a provisional assessment in good time, will save you legal interest. Interest is calculated if the assessment is imposed later than 6 months after the end of the calendar year (1 July 2023). The tax interest is at least 4%. To ensure that the assessment is imposed in time, we recommend that you apply for it before 1 April 2023. The assessment for the 2022 tax year must be paid at once. There is the possibility of paying the assessment for the tax year 2023 in instalments. Do you have questions about this? We are happy to assist you in applying for a provisional assessment.
• If you expect to receive a refund for 2017, an Income Tax return for this year must be submitted before December 31, 2022. In 2023, the 5-year term for submitting this declaration will expire.
• If possible, bundle deductible expenses such as medical expenses and donations in one specific year. For example, a deduction is achieved earlier and the threshold is only deducted once from the expenses. For donations, the threshold disappears completely if you commit the donation to a charitable institution for 5 years.
• The income-related combination discount can be applied to people with children under the age of 12. The conditions are that both partners work. The income-dependent combination discount will be increased to € 2.694 in 2023. From the 1^st January 2025, the income-related combination discount will be abolished. Children born before this date will still be entitled to this tax credit for 12 years. However, there is still talk of a transitional arrangement, the outcome of which is not known at the moment.

Business tax tips

Change in corporate tax

The corporate tax rate will be increased this year. Apart from that, the tax brackets are also modified. The corporate tax rate was 15% on the first €395.000 profit and 25,8% for profits above € 395.000 this was 25% in 2021. In 2023, the rate will be 19% on the first € 200.000. The rate for profits above € 200.000 remains 25,8%.

Corporate tax 2022	2022
First bracket up to € 395.000	15%
Second bracket from € 395.000	25,8%
Corporate tax 2023	2023
First bracket up to € 200.000	19%
Second bracket from € 200.000	25,8%

Changes in box 2 tax – Income from substantial shareholdings

The box 2 rate remains unchanged at 26,9% for 2023. A two bracket tax rate will be introduced in box 2 from 2024. This concerns income from substantial shareholdings, such as dividends and capital gains on shareholdings above 5%. The rate in 2024 will be 24,5% for the first €67.000 and 31% for the amount above that. Since this applies per partner, a total of € 134.000 can be taxed at the low rate in case of tax partnership.

Income tax box 2	2022 and 2023	Income tax box 2	2024
Flat rate	26,9%	First bracket op to € 67,000	24,5%%
		Second bracket fron € 67,000	31%

Tax-free allowances employees 

Because many people have been working from home since the corona crisis (and this indirectly costs the employee money; more energy consumption, coffee consumption, etc.), the cabinet has decided to introduce a tax-free working from home allowance. As a result, employers can reimburse a maximum of € 2 per day or part of a day worked. The tax-free travel allowance of € 0,19 per km will continue to exist and will be raised to € 0,21. The allowances cannot be paid at the same time; per day you can either opt for payment of the work from home allowance, or payment of the travel allowance.

An employer can provide a tax-free allowance for setting up a home workplace. The employer can reimburse the costs for, for example, an office chair or computer screen via other specific exemptions from the work-related costs scheme.

Tax free scheme

We would like to make you aware of the possibility under the Dutch Wages Tax Act to make a payment on a tax free basis for certain reimbursements which normally would be regarded as taxable income. This year this tax free scheme (‘vrije ruimte’) is maximised at 1,7% of the total company wages up to € 400.000,– and 1,18% beyond that. If you have not paid any other reimbursements or benefit in kind to employees including directors which could be regarded as taxable wage, you could still make use of this scheme by paying out a tax free bonus. An amount up to maximally € 2.400 would be seen as common. A temporary widening to 3% over the first €400.000 of the wage bill applies for 2023. This is reduced again from 2024 to 1,92% of the wage bill up to € 400.000.

Termination of efficiency margin for usual wage

Director-major shareholders (>5% shareholding in a BV) are subject to the customary wage scheme. In 2022, the salary could in principle be set 25% lower than what was customary for employees in employment with a third party, also known as the efficiency margin(doelmatigheidsmarge). From 2023, the efficiency margin will be abolished and the salary must therefore be at least equal to that of someone with the most comparable employment. This could therefore result in a salary increase and additional payroll tax to be paid by director-major shareholders before 2023.

Restriction on borrowing from own company

The possibility to borrow from one’s own BV will be restricted as of 2023, in connection with the entry into force of the Excessive Borrowing from Own Company Act(wet excessief lenen). If a shareholder borrows more than € 700.000 from his or her own BV, the excess will be taxed in box 2 (once). The first tax reference point is 31 December 2023. First home equity debts do not count towards the € 700.000 limit if they are covered by a notarial mortgage deed (a mortgage deed is not required for home equity debts existing as of 31 December 2022). In the case of high loans or overdrafts, it is important to anticipate this and start repayments in advance, or reserve money for the tax settlement. Specific rules also apply in partner situations. Is your debt to the BV higher than € 700.000 or were you planning for this? Contact our office to discuss the possibilities and consequences.

Loss relief corporate income 

Currently, companies can offset losses against profits from the precious year or the six consecutive years. No maximum amount applies. From 2022, up to €1.000.000 of the profit can be offset against losses. Only 50% of the profit that exceeds €1.000.000 be set off against tax losses. In addition, the time limit of 6 years will be cancelled; losses can be settled indefinitely. Unfortunately, the restriction applies to all Dutch companies, regardless of whether these losses originate from abroad. For small companies, the longer term for loss set-off may actually be an advantage.

Bill to prevent tax avoidance for international companies

In addition to the aforementioned bills on the Tax Plan, the following two bills have been submitted to the House of Representatives to tackle mismatches and tax avoidance in international structures:

– Bill on ‘Combating mismatches in the use of the arm’s length principle’: adjustment of the rules of arm’s length transfer pricing between international groups in order to prevent tax mismatches. In short, this bill means that a reduction of taxable profit is only permitted if this is deducted by an increase in the foreign tax base;

– Bill ‘Implementation tax liability measure from the second EU anti-tax avoidance directive’: the tax liability for reverse hybrid entities. In short, this proposal means that under certain circumstances the country of residence follows the qualification of the country where the participants or shareholders are established.

UBO register temporarily out of public access

The EU Court of Justice recently ruled that that the provision in the European Anti-Money Laundering Directive, which requires Member States to ensure that any member of the general public must have access to UBO information, is insufficiently substantiated and therefore invalid. Making the information of UBOs publicly accessible constitutes a serious interference with the right to privacy, according to the Court. As a result, the obligation that the UBO register be accessible to everyone is in question. In response, the government has decided that pending further decision-making, the Chamber of Commerce will temporarily stop providing information from the UBO register.

The above does not affect the duty for legal entities to register UBOs. Since 27 September 2020, it is mandatory for (many) entrepreneurs to register a UBO in the UBO register. UBO stands for Ultimate Beneficial Owner. These are individuals who own more than 25% of the shares or hold the economic interest or have effective control of the company.

Other tax tips 

• Do you expect to pay tax for the tax year 2023? If you request a provisional assessment in good time, this will save you tax interest. The tax rate for income tax entrepreneurs is currently 8%.
• Did you find out that you forgot to include some items in your VAT return? Then submit a supplement declaration. You can do this for this year or for the past 5 years. If it concerns VAT to be received or remitted of € 1.000 or less, this is allowed to be included in the next VAT return. You do not need to submit a separate supplementary declaration for this.
• Do you drive a company car and do you use this car privately? In that case, a correction must be made for private use in the last VAT return (to be submitted in January 2022). This may be based on actual use or on the basis of a fixed rate. Do you have questions about this? We are happy to help you.
• If you have made sufficient investments to qualify for the small-scale investment deduction, but have not yet paid all investments, we advise you to make these payments before the end of the year so that you are eligible for the small-scale investment deduction. You are eligible for the small-scale investment deduction when the total investment is higher than € 2.400.–.
• Has your partner worked in your business this year but has not received compensation yet? Then consider paying compensation before the end of the year. This is deductible in your business. For your partner, this reimbursement is taxable in box 1. The rate depends on your partner’s total Box 1 income and is especially advangtageous if your partner has a low income.
• From 1 January 2025, the BPM exemption for company vans will be abolished. However, the exemption will continue to apply to vans purchased before that date. So if you were planning to purchase a van for your business anyway, it will be advantageous if this takes place before 1 January 2025. However, the BPM exemption will continue to apply to emission-free vans.
• Additional measures have been announced regarding repayment of corona tax debts. We ask you to contact us for further clarification.

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We would like to inform you about the latest tax changes and saving opportunities with this end-of-year newsletter. We hope you will benefit from this newsletter. Please contact our office for more information and personal advice. We have distinguished our tips and hints between Individual and business. Please go ahead and read what applies to your situation!

Tax plan summary

As expected, the current outgoing government will not come up with any sensational plans for 2022. The plans largely concern previously taken decisions and smaller changes. The more notable changes are, for example, the abolition of the personal tax deduction for educational expenses and the arranging of a work from home allowance. Furthermore, the first bracket in the corporate income tax will be extended from € 245,000 to € 395,000. For 2023, the percentage of tax deductions in the Income Tax will decrease again by 3%; if it is possible to bring forward deductible expenses, the deduction will yield more this year. The plans are not final yet, as the Eerste Kamer(Dutch Upper House) has yet to vote on them.

Individual 

Index individual fiscal tips

• New Income Tax rates
• Reduction in the rate of deductible items for higher incomes
• 30% ruling end
• Replacement deduction for training costs
• Changes in primary residence scheme
• Transfer tax
• Rent allowance
• Change in income-related combination discount for foreign workers
• Save tax in box 3 with an OFGR or BV
• Take advantage of the annual gift tax exemption
• Provisional assessment
• Saving tax in box 3
• Other tax tips

New income tax rates

There are no substantial changes in the Income Tax rates, only minor deviations and inflation adjustments.

Box 1 – Income from work and home

In 2022, the rate in the first bracket will be reduced from 37.10% to 37.07%. The threshold for the first bracket has also been raised this year, from € 68,507 to € 69,398. The rate for the second bracket remains 49.50%. After 2022, the basic rate will be further reduced step by step to 37.03% in 2024. Below is a schematic representation of the income tax in box 1 in 2021 and 2022.

A three-bracket system still applies to taxpayers who have reached the state pension age. Disc 1 goes from 19.20% to 19.17%. The second bracket goes from 37.10% to 37.07% and the third bracket remains 49.50%. Below is a schematic representation of the income tax in box 1 in 2021 and 2022.

Box 2 – Income from a substantial interest (for example a BV)

The rate for income from a substantial interest remains 26.9%.

Box 3 – Benefits from savings and investments

There is as yet no prospect of taxation on the assets in box 3 over the actual income.

In 2022, the tax-free allowance will be increased from € 50,000 per person to € 50,650 per person (€ 101,300 for tax partners).

In 2021, the rate on the notional return in box 3 has been increased to 31%. This rate will not be adjusted in 2022.

Below is a schematic representation of the capital gains tax in 2021 and 2022.

Reduction in the rate of deductible items for higher incomes

As already mentioned in 2020 and 2021, the highest rate at which virtually all deductible items are to be deducted is gradually being decreased. It can therefore be advantageous to bring forward deductible costs where possible. Taxpayers whose income falls in the highest bracket in box 1 will gradually have less tax advantage from these deductible items. In 2022, these deductible items may be deducted at a maximum of 40%, compared to 43% in 2021.

This percentage will be further reduced to the level of the first bracket, 37.03% in 2024. This concerns the following deductions:

• Alimony
• Deduction of training expenses (only in 2021, see separate chapter)
• Deduction of expenses for specific healthcare costs
• Deduction of weekend expenses for disabled
• Gift deduction
• Mortgage interest deduction
• Entrepreneurial deduction (self-employed deduction, research and development deduction, cooperation deduction, starter’s deduction in the event of incapacity for work, discontinuation deduction)
• Profit exemption for small and medium-sized businesses

Due to this reduction, the deductible items will yield more in 2021 than in 2022 and the following years. If your income falls in the highest tax bracket in 2021, it is therefore advisable, if possible, to pay deductible items such as gifts or healthcare costs before the end of the year.

30% ruling

Did your 30% ruling end on January 1^st 2021? This means that your take-home salary has been lower. Also, you have become regularly taxable in the Netherlands for your worldwide assets and you will have to declare these in your 2021 tax return. You can read our tax tips regarding saving in Box 3 to see how you can minimize your Box 3 tax.

Replacement deduction for study costs

From the tax year 2022 onward, study costs are no longer deductible from the income tax. The tax deduction will be replaced by the STAP budget subsidy scheme (Incentive for the Labor Market Position). This budget will apply to people with a link to the Dutch labor market. From 1 March 2022, workers and job seekers can apply for a STAP budget at the UWV. This is possible per person once a year. The budget is €1,000 per person per year. If the application is approved, the amount is paid to the trainer. Only study costs paid in 2021 can still be deducted in the 2021 income tax return.

Changes in primary residence scheme

From 2022, the primary residence scheme will be adjusted in 3 parts. The scheme is being adjusted because unintended deduction restrictions occurred in marriage and partnership, which sometimes meant that less mortgage interest could be deducted. This occurred, for example, in people who bought a house with a partner, but had previously bought a house themselves (and had sold it with equity). Or with people who have a primary residence and of which one of the partners dies. It is adjusted for the components: home acquisition reserve, repayment position and home acquisition debt. If this applies to you, we are happy to provide further explanation.

Property transfer tax

It is important to take into account unforeseen circumstances before transfer at the notary!
The start-up exemption has been introduced from the year 2021. First-Time Buyers between the ages of 18 and 35 (under certain conditions) do not pay a one-off transfer tax for their own home. Buyers from the age of 35 who are going to live in the house themselves pay 2% transfer tax. Buyers who are not going to live in the house themselves pay 8% transfer tax. It had already been arranged that in the event of unforeseen circumstances buyers could pay the 2% transfer tax and not the 8% after transfer at the notary, but nothing had yet been arranged for the period between the purchase and transfer at the notary. This will now also be taken into account from 1 January 2022. For example, if the buyers would divorce before the transfer at the notary, but after signing the purchase contract, and as a result, they will not live in the house themselves? Then they only have to pay 2% transfer tax and not 8%.

Rent allowance

The cabinet wants renters to receive or keep rent allowance more often. The current conditions will be relaxed on two points. From 1 January 2022, the application for a residence permit for children up to the age of 18 is no longer a condition for entitlement to housing benefit. In addition, from 1 January onward, the right to rent allowance in the event of exceeding the rent limit will be reinstated. Renters will again be eligible for housing benefit if their income or assets fall again and if they were entitled to housing benefit in the past regarding their house.

Change in income-related combination discount for foreign workers

The income-related combination discount can be applied to people with children under the age of 12. The conditions are that both partners work. For people who work in the Netherlands but live abroad, a partner who lives abroad does not count as a tax partner in the Netherlands. As a result, there was an unintended entitlement to the income-related combination tax credit in the past. From 2022, the partner abroad will now also be included to check whether they are entitled to this tax credit. The income-related combination discount will be reduced from a maximum of €2,815 to €2,534.

Save tax in box 3 with an OFGR or BV

If you have substantial assets and therefore pay tax in the higher box 3 brackets, it could be an option to set up an OFGR or BV to save box 3 tax. If you transfer the capital to this entity, this capital will be taxed in the corporate income tax and substantial interest taxation for the actual return on this capital.

The advantage is that this capital is then no longer taxed in box 3 at a (high) notional return. This is especially beneficial for low-yielding assets such as savings accounts. We recommend that you first discuss the options with an adviser to see whether this will benefit your situation.

You can also save on box 3 taxation by reducing the balance before the reference date of 1 January, for example by bringing forward expenses, mortgage repayment, annuity deposit, or payment of health insurance.

Take advantage of the annual gift tax exemption

Have you not yet made use of the annual gift exemption this year? You have until 31 December to make these donations. Please note that the money must be credited to the recipient’s account by December 31, 2021 at the latest. In 2021, the annual tax-free amounts will be temporarily increased by € 1,000 due to the Corona crisis. There is a general exemption of € 3,244. An exemption of € 6,604 applies to gifts to children. In addition, there are a number of one-off gift exemptions (for example, for a study or the purchase of a primary residence). If you have any questions regarding these exemptions, we will be happy to assist you.

Provisional assessment – ​​recommended if you receive several pensions

If you receive a pension from several pension institutions, you often have to pay an additional amount in income tax when you file a return. This is caused by the fact that your total income falls in a higher bracket due to the various pensions. The pension authorities are not aware of your total income and only withhold tax on the amount they pay you. As a result, it is possible that too little wage tax has been deducted from the pensions and that you have to pay extra. You can request a provisional assessment to limit tax interest and to be able to pay the amount of income tax in installments. Do you think this situation applies to you? Or are you retiring soon? Please contact our office. We would be happy to see if it is wise to request a provisional assessment from the Tax Authorities.

Saving tax in box 3  

The reference date for taxed box 3 assets is January 1. Here are a few tips to reduce your assets as of 1 January.

• Do you plan to make major expenditures soon? Such as, for example, the purchase of a car, renovation of a house or consumer goods. Then it might be wise to make the purchase before 1 January. In this way you reduce your taxable assets.
• You can use your savings to pay off part of the mortgage on the primary residence (box 1). In addition to wealth tax, this often also saves you some mortgage interest. Ask your mortgage lender about the conditions in order to prevent/limit penalty interest. Have you received a provisional refund in connection with the mortgage interest? Do not forget to adapt this to the new situation.
• If possible, you can ask your health insurer whether it is possible to pay the health care premium in one go (before 1 January) instead of paying in installments. You often also receive a small discount for paying the premium all at once.
• It can be beneficial to have small debts (together below the threshold of € 3,200 per taxpayer) repaid before January 1. In this way, the box 3 income is reduced and further interest on these loans is also avoided. Interest on personal loans is usually high and this interest is not tax deductible.
• Deposit money into an annuity. Money that has been deposited as an annuity is no longer taxed in box 3. A deposit is worth considering, especially in the event of a pension shortfall. There are conditions attached to this.
• If you have not yet made any donations this year, you can consider making them before 31 December.

Other tax tips

• Do you expect to pay tax for the 2021 or 2022 tax year? Request a provisional assessment in good time, this will save you tax interest. You pay tax interest if the assessment is imposed later than 6 months after the end of the calendar year (1 July 2022). The tax interest is at least 4%. To ensure that the assessment is imposed in time, we recommend that you apply for it before 1 April 2022. The assessment for the 2021 tax year must be paid at once. There is the possibility of paying the assessment for the tax year 2022 in installments. Do you have questions about this? We are happy to assist you in applying for a provisional assessment.
• If you expect to receive a refund for 2016, an Income Tax return for this year must be submitted before December 31, 2021. In 2022, the 5-year term for submitting this declaration will expire.
• If possible, bundle deductible expenses such as medical expenses and donations in one specific year. For example, a deduction is achieved earlier and the threshold is only deducted once from the expenses. For donations, the threshold disappears completely if you commit the donation to a charitable institution for 5 years.
• If your capital in the bank is higher than € 100,000, you may be confronted with negative interest. To avoid this, you can divide your money among several banks. Do ask for the conditions at the various banks. Negative interest may already be calculated for an amount lower than € 100,000.

Business tax tips 2021

Last year, the plans for an investment discount for SMEs (the BIK scheme) ultimately did not go ahead. This plan was to replace the cancellation of the plan to reduce the corporate income tax rates. This is probably due to the large expenses that the government has had to spend in order to support businesses during the corona crisis. We hope the reduction in corporate income tax for SMEs will eventually yet take place. For next year, however, an increase is planned in the second bracket from 25% to 25.8%. The first bracket in the corporate income tax has been extended from € 245,000 to € 395,000.

This extension benefits SMEs. As a result, doing business in a BV becomes more interesting for profits of up to nearly € 400,000.

Index business tax tips:

• Change in box 2 and corporate tax
• Increasing of support rates in the Environmental Investment Allowance (MIA)
• Introduction of tax-free work from home allowance
• Increase tax-free reimbursement
• Stock options become more attractive as a remuneration
• Private use electric car
• Excessive debts of a shareholder to his own BV
• Loss relief corporate income
• Simplification of the one-stop-shop system in the VAT rules for e-commerce
• Bills to prevent tax avoidance for international companies
• UBO register
• Other tax tips
• Corona measures

Change in box 2 and corporate tax

The rate in box 2 will not be changed this year. This concerns income from a substantial shareholding, such as dividends and capital gains on equity interests above 5%. The rate remains 26.9%.

The corporate tax rate will be increased this year. Apart from that, the tax brackets are also modified. The corporate tax rate was 15% on the first €245,000 profit and 25% for profits above €245,000 this was 25% in 2021. In 2022, the rate will be 15% on the first € 395,000. The rate for profits above € 395,000 will be increased to 25.8%.

Increasing of support percentages in the Environmental Investment Allowance (MIA)

The government wants to minimize pollution and is therefore making environmentally-friendly investments more attractive for companies. The environmental investment deduction (MIA) allows companies to deduct a percentage of the investment costs from the taxable profit. As of January 1, 2022, the support percentages in the Environmental Investment Allowance will be increased. The support percentages were 13.5%, 27%, and 36%. The proposal is to increase these percentages to 27%, 36%, and 45% respectively.

Introduction of tax-free work from home allowance

Because many people have been working from home since the corona crisis (and this indirectly costs the employee money; more energy consumption, coffee consumption, etc.), the cabinet has decided to introduce a tax-free working from home allowance. As a result, employers can reimburse a maximum of € 2 per day or part of a day worked. The tax-free travel allowance of € 0.19 per km will continue to exist. Despite the rising prices of petrol and diesel, the travel allowance will not be increased but will remain at € 0.19 per kilometer. The fees cannot be paid at the same time; per day you can either opt for payment of the work from home allowance or payment of the travel allowance.

An employer may already provide a tax-free allowance for setting up a home workplace. The employer can reimburse the costs for, for example, an office chair or computer screen via other specific exemptions from the work-related costs scheme.

Increase tax-free reimbursement

Employers may reimburse certain expenses to their employees tax-free up to a maximum percentage of the total wage sum. In the context of the corona support measures, the maximum tax-free reimbursement to employees has been temporarily increased from 1.7% to 3% over the first € 400,000 of the wage sum. This temporary measure has been extended for the 2021 tax year. Do you still want to make use of this? Then you are still up to and including 31 December 2021 to reimburse the employee for certain costs tax-free. A bonus can also be paid out under this arrangement if this is customary (partly depending on the amount of the bonus). In 2022, the free space will be reduced again to 1.7% over the first € 400,000 of the wage sum and 1.18% on the excess. This arrangement comes in addition to expenses that are tax-free anyway, such as claiming business mileage at € 0.19 per km. Please contact your advisor for further information about the conditions.

Stock options become more attractive as a remuneration

Employers can offer their employees stock options as remuneration instead of paying them wages. This mainly occurs in companies that have just started (startups), because they do not yet have enough money to pay an appropriate salary. With stock option rights, the employee is given the right to buy a certain number of shares at a predetermined price in a certain period. Currently, tax is levied when the employee converts the options into shares. The disadvantage of this, is that the employee has to pay tax now, while they are not always allowed to sell the shares, in order to have the cash to pay the taxes. The government’s proposal is that employees can now choose when they pay tax. In future, the employee would be able to choose: either pay tax when the shares are tradable (and therefore money is available) or pay tax when the options are converted into shares (as it is now in 2021 ). This bill has been deferred for further consideration, and it is not clear yet whether or when it will come into force.

Private use electric car

As announced last year, the fictitious amount for the private use (‘bijtelling’) of electric cars will be further increased. In 2022, this addition will be increased to 16% on the first € 35,000 (this was 12% on the first € 40,000) and 22% on the excess. From 2023, the proposal is to shorten the first bracket to € 30,000.

Excessive debts of a shareholder to his own BV

It was previously announced that borrowing from a private limited company by a shareholder is to be limited. This plan would be implemented from 2022 onwards. However, this has been postponed to 2023. In addition, the State Secretary has asked the House of Representatives to continue the discussion in connection with a broader discussion about the tax treatment of assets that is being held in the formation of a new cabinet. It is to be expected that a new government will come up with further details.

Regarding this plan, from 2023 onward, loans or current account amounts in excess of an amount of €500,000, would be taxed at the then applicable rate in box 2 (rate 2022: 26.9%). Under certain conditions, an exception applies to home loans. In the case of large loans or current account debts, it is important to anticipate this and start with repayments, or to reserve money for the tax settlement.

Loss relief corporate income

Currently, companies can offset losses against profits from the previous year or the six consecutive years. No maximum amount applies. From 2022, up to €1,000,000 of the profit can be offset against losses. Only 50% of the profit that exceeds €1,000,000 be set off against tax losses. In addition, the time limit of 6 years will be canceled; losses can be settled indefinitely. Unfortunately, the restriction applies to all Dutch companies, regardless of whether these losses originate from abroad. For small companies, the longer term for loss set-off may actually be an advantage.

Simplification of the one-stop-shop in the VAT rules for e-commerce

New VAT rules for e-commerce apply from 1 July 2021 onwards. This concerns Dutch companies that sell to consumers in other EU countries. The rules consist of a  lower threshold for distance sales and a simplified VAT declaration via a one-stop shop system so VAT does not have to be paid separately in each EU country. The rules apply when the Dutch webshop achieves an annual turnover of € 10,000 or more with sales to consumers in EU countries outside of the Netherlands (Dutch VAT may be charged below this).

The thresholds for intra-EU distance sales per individual EU country have been abolished. There is now 1 joint threshold amount of € 10,000 on an annual basis. The entrepreneur has to keep an eye on the threshold amount every year. As soon as the limit of € 10,000 is reached, the local VAT rate of the country where the private customer lives, must be applied from that moment on. In the following year, the entrepreneur should continue to invoice the local VAT of the EU country. If the entrepreneur’s turnover in the year after that was below the threshold of € 10,000, then Dutch VAT may be charged again. The entrepreneur may also choose to continue to invoice with the local VAT rate of the EU customer. The foreign VAT return can be filed separately for each EU country, or via the one-stop-shop- system. This is a new system for submitting VAT returns in one return for multiple EU countries.

The rules have also changed for the import of products from outside the EU that are delivered directly to consumers in the Netherlands, which is called dropshipping. Due to the expiry of the exemption, Dutch VAT will have to be paid on this. Also for this arrangement, a simplified procedure is in place for import VAT declarations. If you have further questions about these regulations, please contact us.

Bills to prevent tax avoidance for international companies

In addition to the aforementioned bills on the Tax Plan 2022, the following two bills have been submitted to the House of Representatives to tackle mismatches and tax avoidance in international structures:

• Bill on ‘Combating mismatches in the use of the arm’s length principle: adjustment of the rules of arm’s length transfer pricing between international groups in order to prevent tax mismatches. In short, this bill means that a reduction of taxable profit is only permitted if this is deducted by an increase in the foreign tax base;
• Bill ‘Implementation tax liability measure from the second EU anti-tax avoidance directive’: the tax liability for reverse hybrid entities. In short, this proposal means that under certain circumstances the country of residence follows the qualification of the country where the participants or shareholders are established.

UBO register

Since September 27, 2020, it is mandatory for (many) entrepreneurs to register their UBO in the UBO register. The register was created to prevent illegal acts such as money laundering and terrorist financing being carried out with financial constructions. UBO stands for Ultimate Beneficial Owner. These are persons who own more than 25% of the shares, or economic interest, or actual control of the company.

The following companies must register a UBO in the UBO register:

• Unlisted private and public limited companies(BVs and NVs)
• Foundations(stichtingen)
• Associations with full legal capacity/with limited jurisdiction but with a company (verenigingen)
• Mutual insurance companies
• Cooperatives
• Partnerships: partnerships, general partnerships, and limited partnerships
• Shipping companies
• European Public Limited Companies (SE)
• European Cooperative Societies (SCE)
• European Economic Interest Groups that, according to their statutes, have their registered office in the Netherlands (EEIG)
• Religious denominations

If the company was registered at the Chamber of Commerce before 27 September 2020, the UBO must be registered in the UBO register before 27 March 2022. If the company is registered with the Chamber of Commerce after September 27 2020, the UBO must be registered within one week of incorporation. If changes are made to the UBO data, this must also be changed in the register, no later than one week after the change has taken effect.

The UBO can be registered at the Chamber of Commerce by means of an online UBO statement. If you need help with this or have any questions about this, we will be happy to assist you.

Other tax tips

• Do you have a lot of savings and your own BV? You may consider transferring your savings to the B.V. by means of a share premium deposit before the end of the year. If the deposit is made before the end of the year, you will no longer have to pay box 3 taxation on that amount in 2022. It is important that you are aware of the conditions and consequences.
• Do you expect to pay tax for the tax year 2022? If you request a provisional assessment in good time, this will save you tax interest. The tax rate for income tax entrepreneurs is currently 4%. For corporate tax, this percentage is normally 8%, but this has been reduced to 4% due to the Corona crisis. From 1 January 2022, this percentage will (probably) be reset to 8%.
• Did you find out that you forgot to include some items in your VAT return? Then submit a supplement declaration. You can do this for this year or for the past 5 years. If it concerns VAT to be received or remitted of € 1,000 or less, this is allowed to be included in the next VAT return. You do not need to submit a separate supplementary declaration for this.
• Do you drive a company car and do you use this car privately? In that case, a correction must be made for private use in the last VAT return (to be submitted in January 2022). This may be based on actual use or on the basis of a fixed rate. Do you have questions about this? We are happy to help you.
• If you have made sufficient investments to qualify for the small-scale investment deduction, but have not yet paid all investments, we advise you to make these payments before the end of the year so that you are eligible for the small-scale investment deduction. You are eligible for the small-scale investment deduction when the total investment is higher than€ 2,400.–.
• Has your partner worked in your business this year but has not received compensation yet? Then consider paying compensation before the end of the year. This is deductible in your business. For your partner, this reimbursement is taxable in box 1. The rate depends on your partner’s total Box 1 income and is especially advantageous if your partner has a low income.

Corona measures

With the rising Covid cases and new lockdown measures, the government has revived some of the business support measures such as the NOW and TVL. The NOW (Emergency Bridging Measure for Employment) provides compensation for wage costs in the event of a loss of turnover in order to maintain as much employment as possible. The Fixed Cost Allowance, or TVL, helps SMEs to pay part of their fixed costs. Also, the deferral of tax payment deadlines has been extended until the end of this year under certain conditions. As the measures are based on the temporary lockdown measures, these change continually. Please check for the most recent updates at https://business.gov.nl/corona/financial-support-measures/corona-support-for-entrepreneurs-after-1-october-2021/

Is a tax return necessary?

If the Tax Office issues you with a tax form or letter to request you to do so, this will have to be filed in any case. If you do not receive a letter, but you have to pay additional tax on your income or assets, you are also obliged to file a tax return. Obviously if you are entitled to a refund, it is in your own interest to file one. For a regular domestic tax return the deadline is May 1st. For a migration tax return (M-form) the deadline is July 1st. For both forms extension can be requested if necessary.

This year again we have heard of tax payers who received a letter from the Dutch tax authorities mentioning that they did not need to submit a tax return, although in their particular situation it would have been either mandatory to file a tax return, or they were entitled to a refund. For example a foreign tax payer with property in the Netherlands; in principle in such a situation tax is due and at any rate a tax return should be filed. Furthermore the Tax Office in the main is not aware of your possible tax deductions. We therefore advise to have your refund possibilities checked.

The Tax Office has also mentioned that some details in the prefilled tax return may be incorrect, such as the life annuity premiums. It is always important to check the figures with the underlying documents. By the way, any electronic messages you receive from the Tax Office (Berichtenbox) are still also sent by regular mail.

Tax deductions 2020

In the tax return 2020 you can claim the following personal tax deductions to reduce your taxable income:

• mortgage interest of your first residence
• life annuity premiums (if deposited before 1st July 2021)
• non-compensated health care expenses (including medical care, prescribed medication, travel expenses for hospital visits);
• financial obligations to an ex-spouse i.e. alimony
• gifts or donations to recognised charities (refer to the ANBI-list)
• study costs
• travel expenses for regular use of public transport between home and work
• weekend expenses for taking care of disabled relatives

The study costs tax deduction will most likely be abolished in 2022; costs paid in 2021 will be deductible in any case.

Do take into account that for some of the mentioned deductions a threshold or other conditions may apply. The expenses may therefore not be fully tax deductible. If you think you had expenses that may qualify and have questions about this, please contact us.

Legal interest on tax amounts

With the new tax interest rules, from July 1st 2020 the Tax Office will charge interest on potential tax debts for the 2020 tax return. This interest amounts to 4%. If you expect a high assessment and you want to avoid paying a high interest, please contact us to request a provisional assessment. In case of a tax refund the Tax Office only compensates interest very frugally.

End of 30% ruling period

Did your 30% ruling end in 2020 or per January 1st 2021? It is important to assess the consequences of the end of the 30% ruling in your particular case. The 30% ruling end will affect your active income (box 1) as well as substantial shareholdings (box 2) and all other assets in the Netherlands and worldwide (box 3).

If you share complete information about your situation we will be pleased to file your 2020 tax return and seek ways to optimize your tax situation. For example: if your partner is still under the 30% ruling assets may be allocated to your partner.

End-of-year tax tips individual

The box 3 reform proposed earlier has been withdrawn this year. Instead, the tax-free allowance will be increased to € 50,000 per person next year; to keep it completely budget neutral, the rate will go up a little. The transfer tax will be reduced from 2% to 0% for first time buyers under certain conditions; on houses and other real estate not occupied by taxpayers themselves, the levy will increase from 2% or 6% to 8%. Despite the fact that the measure is mainly presented as a reduction, this tax will actually increase on balance.

Index individual tax tips:

• New rates in the Income Tax
• 30% ruling end
• Reduction of the rate of deductible items for higher incomes
• Improvement of allowances
• Changes in transfer tax
• Save in box 3 with an OFGR or BV

• Cash donations are no longer deductible
• Take advantage of the annual gift exemption
• Other tax tips

New rates in Income Tax

Box 1 – Income from work and home

In 2020, the two-bracket system was introduced for box 1 income such as wages. For 2021, the rate is 37.10% for income up to € 68,507 and 49.5% for income above € 68,507. For taxpayers who have reached the state pension age, an adjusted rate of 19.20% applies for income up to approximately € 35,000, since the social premium rate is lower.

Box 2 – Income from a substantial interest (for example, a BV)

The rate for income from a substantial interest or substantial shareholding was 26.25% in 2020. Last year it was already determined that this rate would increase further to 26.9% in 2021. For more information, please refer to the business section in this newsletter.

Box 3 – Gains from savings and investments

In box 3, the capital is taxed on the basis of a notional return or deemed income. The plan for reform of box 3 presented last year, whereby different rates would apply to savings, other assets and debts, has been withdrawn by the State Secretary. Other complications would have arisen with that system.

Instead, the tax-free allowance will be increased in 2021 from € 30,846 per person to € 50,000 per person (€ 100,000 for tax partners). As a result, nearly 1 million savers will no longer pay box 3 tax compared to 2020. The brackets will also be adjusted this year.

In 2021, bracket 1 will run from € 50,000 to € 100,000 (this was € 30,849 to € 103,643). In 2021, bracket 2 will run from € 100,000 to € 1,000,000 (this was € 103,643 to € 1,036,418). Bracket 3 will run from € 1,000,000 in 2021 (this was € 1,036,418).

In order to keep the levy budget neutral, the rate on the notional return in box 3 will be increased from 30% to 31%. This is the first time since 2001 that the tax rate in box 3 has been increased.
Below is a schematic representation of the capital gains tax in 2021. The percentages for 2020 are stated in brackets.

30% ruling end

Did your 30% ruling start between January 1st 2013 and January 1st 2016 ? In that case your 30% ruling will end as per January 1st 2021. This means that from then on your take-home salary will be lower. Also, since you can no longer opt to be considered a partial non-domestic taxpayer, you will become regularly taxable in the Netherlands for your worldwide assets. It is important that you are aware of the tax consequences.

Reduction of the rate of deductions for higher incomes

As already mentioned last year, the highest rate at which all deductible items can be deducted is gradually being phased out. It can therefore be advantageous to pull forward deductible costs where possible. Taxpayers whose income falls in the highest bracket in box 1 will gradually have less tax benefit from these deductions. In 2021, these deductible items may be deducted at a maximum of 43% compared to 46% in 2020.

This percentage will be further reduced in the coming years to the level of the first bracket, approximately 37% in 2023. This concerns the following deductible items:

• Alimony
• Deduction of tuition fees
• Deduction of expenses for specific healthcare costs
• Deduction of weekend expenses for the disabled
• Gift deduction
• Mortgage interest deduction
• Entrepreneur’s allowance (self-employed person’s allowance, research and development work deduction, co-workers’ allowance, starter’s allowance in the event of disability, discontinuation credit)
• Profit exemption for small and medium sized businesses

As a result of this reduction, the deductible items will yield more in 2020 than in 2021 and the following years. If your income is taxed in the highest tax bracket in 2020, it is therefore advisable, if possible, to pay deductible items such as gifts or healthcare costs before the end of the year.

Improvement allowances

Partly due to the child allowance affair, the cabinet is working on improving the allowance system. The 2021 Tax Plan sets out 3 steps for how the cabinet wants to achieve this. These steps are: improving legal protection, making the measure more human and changing the concept of partnership. For example, taxpayers must be able to respond earlier to a proposed decision by the Tax Authorities, the Tax Authorities may only stop benefits if a citizen has been given sufficient opportunity to provide their own information and the Tax Authorities will soon be able to request more information from other parties. Amounts smaller than € 98 will no longer have to be repaid from 2021. And any partner will no longer be counted for the entire allowance year, but from the first of the month after the partnership has started. This way, situations are resolved where people had to repay part of their allowances.

Changes in transfer tax

From the year 2021, a first time buyers exemption will be introduced. Buyers between the ages of 18 and 35 do not pay a one-off transfer tax for their own home. The condition is that the buyers themselves will live in this house, have not previously used the exemption and the house does not cost more than € 400,000 (if the transfer takes place after March 31, 2021, between January 1 and March 31, 2021). this limit does not apply). The house does not have to be the first owner-occupied home.

If one of the buyers is 35 years or older, this person pays 2% transfer tax on his / her part of the house. The moment of transfer of the house is decisive and not the moment of signing the purchase agreement.

From 1 January 2021, the transfer tax will also be increased for homes that are not purchased as an owner-occupied home in which the taxpayer himself lives (for example, a home intended for rental or as a holiday home or a home purchased by a parent for his child). from 2% to 8%. The rate will also increase for other real estate, such as commercial properties, from 6% to 8%.

Save in box 3 with an OFGR or BV

If you have substantial capital and therefore pay tax in especially the higher box 3 brackets, it may be an option to set up an OFGR or BV to save box 3 tax. If you transfer the capital to this entity, this capital will be taxed in the corporate tax and substantial interest tax on the actual return on this capital.

The advantage is that this capital is then no longer taxed in box 3 at a (high) notional return. This is mainly advantageous for low-yielding capital such as savings accounts. We recommend that you first discuss the options with an advisor to see whether this will benefit your situation.

You can also save on box 3 tax by reducing the balance for the reference date of January 1, for example by bringing forward expenses, mortgage repayments, annuity deposits or payment of health insurance.

Cash donations are no longer deductible

From the year 2021, gifts that you pay in cash to an ANBI charities are no longer tax-deductible. Gifts must always be proven with supporting documents (such as bank statements). Where possible, it is therefore preferable to transfer donations by bank. Some charities have already responded to this by, for example, offering the option of paying by pin or transferring via a payment app.

Take advantage of the annual gift exemption

Have you not yet used the annual donation exemption this year? You have until December 31st to make these donations. Please note that the money must be credited to the recipient’s account by December 31, 2020 at the latest. In 2020 a general exemption of € 2,208 applies. An exemption of € 5,515 applies for gifts to children. In addition, there are a number of one-off gift exemptions. Do you have any questions about this? We are happy to provide further explanation.

Other tax tips

• Do you expect to have to pay tax for the 2020 or 2021 tax year? Request a provisional assessment in good time, this will save you interest. You pay interest if the assessment is imposed later than 6 months after the end of the calendar year (1 July 2021). The interest is at least 4%. To ensure that the assessment is imposed on time, we recommend that you apply for it before April 1, 2021. The assessment for the 2020 tax year must be paid in one go. You may pay the assessment for the 2021 tax year in installments. Do you have any questions about this? We are happy to assist you in applying for a provisional assessment.
• If you expect to receive a refund for the year 2015, an Income tax return for this year must be submitted before 31 December 2020. In 2021, the 5-year period for submitting this declaration will expire.
• If possible, bundle deductible costs such as medical expenses and gifts in one specific year. For example, a deduction is achieved earlier and the threshold is only deducted once from the expenditure. For donations, the threshold no longer applies if you commit the donation to a charity for 5 years. In addition, an increase of 25% applies for donations to a cultural institution (up to a maximum of € 1,250 extra).
• Do not wait until December 31 to transfer amounts. The date on which you transfer the amounts is not always the date on which the amount is transferred by the bank. Although many banks switched to a system in which this is the case last year, this does not yet apply to all banks. We therefore advise you to transfer the amounts a few days before the 31st.
• If you do not meet the conditions for tax partnership, but do live together and you want to be treated as tax partners before 2020 in order to optimally benefit from the benefits of the tax partnership, you still have until to arrange. You can conclude a cohabitation contract with the civil-law notary for this.
• Did you receive a gift in 2018 and then made use of the one-off increased exemption for the home? Then you still have until the end of this year to spend this money on your own home (purchase, renovation or repayment of the mortgage). Are you not doing this? Then gift tax will still have to be paid on the amount that has not been spent on the owner-occupied home.
• Did you have solar panels installed during 2020 and have you not yet reclaimed the VAT? You have until 30 June 2021 at the latest to reclaim the VAT.

End-of-year tax tips Business

In the business area, the planned reduction in the highest corporate tax bracket is canceled. To compensate for this to some extent, an investment discount (BIK) will be introduced for SMEs. All this is intended to keep investments up to standard in these times of crisis. Furthermore, measures are planned to counter advantageous tax structures for multinationals; however, as far as loss compensation is concerned, all companies, including those without international interests, may notice the effects.

The extensive support measures to businesses in the context of the corona crisis will largely continue until 1 July 2021. We will have to wait and see what new plans the next cabinet will present after the elections in March next year.

Business tax tips index:

• Change in box 2 and corporate income tax
• Investment discount
• Adjustment of loss compensation and international transactions
• Reduction of self-employed person’s allowance
• Free space adjustment
• Additional tax liability electric car
• Payment discount for corporate tax
• Increase in the rate of the innovation box
• Other tax tips

Change in box 2 and corporate income tax

As announced last year, the corporate tax rate will be reduced in the coming years. In addition, the tax brackets will also be adjusted. The corporate tax rate was 16.5% on the first € 200,000 profit and for profits in excess of € 200,000, this was 25% in 2020. In 2021, the rate will be 15% on the first € 245,000. The rate for profits above € 245,000 remains 25%.

In 2022, the tax brackets will be adjusted again and the first bracket will be increased to € 395,000. Last year it was promised that the high corporate income tax rate of 25% would also be lowered further. This is however cancelled. The government will use the proceeds to finance the corona measures and a scheme that encourages entrepreneurs to invest.

The rate for box 2 will be adjusted as planned. This concerns income from a substantial interest, such as dividends and capital gains on equity interests above 5%. The current rate of 26.25% will be increased to 26.9% in 2021. If you, as a director and major shareholder, are considering paying out dividends, this is most beneficial before the end of the year so that you benefit from the lower rate.

Investment discount

A new investment discount is being created; the BIK (Job-related Investment Discount). This scheme is intended to ensure that entrepreneurs continue to invest in new business assets, even in times of crisis. Companies can offset the investment discount against the wages tax to be paid.

The scheme applies to new investments made from January 1, 2021 to December 31, 2022. A lower limit of € 1,500 per business asset and € 20,000 per application applies. A maximum of 4 applications may be made per year. The investments must be paid in full in 2021 or 2022 and taken into use within 6 months after full payment. With large investments in a year, the discount is3.9% up to amounts of € 5,000,000, above that a discount of 1.8% applies.

Adjustment of loss compensation and international transactions

The cabinet wants to tax multinationals more fairly. At present, it may happen that companies that make a profit in the Netherlands do not have to pay tax on this in the Netherlands as they can offset losses or claim certain tax deductions. The government will tackle this problem by means of two measures which, incidentally, may also apply to companies other than multinationals.

The first measure is to limit loss compensation. Currently, companies can offset losses against profits from the previous year or the six consecutive years. No maximum amount applies. From 2022, up to € 1,000,000 of the profit can be offset against losses. Only 50% of the profit that exceeds € 1,000,000 be set off against tax losses. In addition, the time limit of 6 years will be cancelled; losses can be settled indefinitely. Unfortunately, the restriction applies to all Dutch companies, regardless of whether these losses originate from abroad. For small companies, the longer term for loss set-off may actually be an advantage.

The second measure is that informal capital structures are tackled. In the current situation, it may happen that in an international transaction a company in the Netherlands can deduct the costs, but does not pay tax on the corresponding proceeds in the other country. As of 2022, no more costs may be deducted from the profit in the Netherlands if no amount or if less than an amount at arm’s length is included in the tax base in the other country.

Reduction of self-employed person’s allowance

As announced last year, the self-employed deduction is being reduced from 2020 onwards. The plan was to reduce this to € 5,000 in nine years. Now the self-employed deduction will be further reduced to € 3,240 in 2036. In 2020 the maximum self-employed deduction was € 7,030. In 2021, the maximum self-employed deduction is € 6,670.

The entrepreneur will be compensated for the reduction in the self-employed deduction by the increase in the employed person’s tax credit and the reduction of the basic income tax rate to 37.10%. In time, the self-employed will pay more tax due to the further decrease in the self-employed deduction.

Increase tax free reimbursement

Employers may reimburse certain expenses to their employees tax free up to a maximum percentage of the total wage sum. In the context of the corona support measures, the maximum tax free reimbursement to employees has been temporarily increased from 1.7% to 3% over the first € 400,000 of the wage sum. However, this is a temporary measure that only applies for the 2020 tax year. Do you still want to make use of this? Then you still have up to and including 31 December 2020 to reimburse the employee for certain costs tax-free. A bonus can also be paid out under this arrangement if this is customary (partly depending on the amount of the bonus). In 2021, the free space will remain 1.7% over the first € 400,000 of the wage sum. The percentage will be reduced to 1.18% on the excess. This was 1.2% in 2020. This arrangement comes in addition to expenses which are tax free anyway, such as claiming business mileage at € 0.19 per km. Please contact your advisor for further information about the conditions.

Private use electric car

As announced last year, the fictitious amount for private use (bijtelling) of electric cars will be further increased. In 2021, this will be increased to 12% over the first € 40,000 (this was 8% over the first € 45,000) and 22% over the excess. In 2022, the addition for the first € 40,000 will be increased to 16% and  in 2025 to 17%. An exception to this regulation are solar cell cars. The maximum catalogue value does not apply to these cars.

Payment discount corporate tax

At present, the Tax Office grants a payment discount if a provisional assessment for corporation tax that may be paid in installments during the year, is paid in one go. This payment discount will be abolished from 2021. According to the government, this is to prevent abuse.

Increase in the rate of the innovation box

When a company makes a profit from certain innovative activities, they may have to pay less corporate tax on this profit by applying the innovation box. The effective tax rate of this innovation box increases from 7% to 9%.

Corona measures

The cabinet has introduced many compensation measures this year in view of addressing the corona crisis. A number of these measures have been extended or legally formalised. The most important measures from the third support package, such as the NOW, TVL and Tozo, have been extended until July 1, 2021. The NOW (Emergency Bridging Measure for Employment) provides compensation for wage costs in the event of a loss of turnover of at least 20% in order to maintain as much employment as possible.

The Fixed Cost Allowance, or TVL, helps SMEs to pay part of their fixed costs. The allowance of a minimum of € 750 and a maximum of € 90,000 is for companies that have lost more than 30% of their turnover as a result of the corona crisis. The Tozo (Temporary bridging scheme for self-employed persons) is a living allowance for the self-employed. The income is thus supplemented to the social minimum. The schemes have different deadlines and must be requested from different authorities. You can find more information about this on the website of the Dutch government https://business.gov.nl/corona/overview/the-coronavirus-and-your-company/ .

In addition, the tax authorities have also offered the option of postponing payment. The special deferment of payment ends no later than 1 January 2021. At the next tax return, the tax will have to be paid again within the normal term. A maximum repayment term of 3 years applies to the outstanding tax debt.

 Other tax tips

• Do you have a lot of savings and you own a private limited company (B.V.)? You can consider transferring these savings by means of a share premium deposit before the end of the year in the B.V. If the payment is made before the end of the year, you will no longer have to pay a box 3 levy on that amount in 2021. It is important that you are aware of the conditions and consequences.
• Do you have a sole proprietorship or partnership? If you keep the working capital in the company up to a certain level, you may be able to save box 3 tax. For example, if you wait until after 1 January with a large private drawing, you do not have to pay a box 3 levy on that amount. It is important, however, that the balance in the business account is not so high that the amounts will be seen as surplus for business operations. If you plan to make large expenditures for the company in the future and therefore want to reserve money for this now, this is a reason to keep more capital in the company than usual.
• Do you expect to have to pay tax for the 2020 or 2021 tax year? Request a provisional assessment in good time, as this will save you tax interest. The tax interest for income tax entrepreneurs is currently 4%. For corporate tax this percentage is normally 8%, but this has been reduced to 4% in connection with the Corona crisis. This measure has been extended until December 31, 2021 (refer to the chapter on corona measures).
• Have you found out that you forgot to include some items in your VAT return? Then file a supplement declaration. You can do this for this year or for the past 5 years. If it concerns VAT of € 1,000 or less to be received or paid, this may be included in the next VAT return. You do not need to submit a separate supplement declaration for this.
• Do you drive a company car and do you use this car privately? In that case, a correction must be made for private use in the last VAT return (to be submitted in January 2021). This is allowed on the basis of actual use or on the basis of a fictitious amount. Do you have any questions about this? We are happy to help you.
• As a director major shareholder (DGA), do you use computers, laptops, tablets or mobile phones for your work? These can be provided or reimbursed tax-free.
• As already indicated, the rates of income tax, corporation tax and the tax rate in box 2 will be adjusted. This offers interesting planning options for, for example, the choice between paying wages or dividends. We are happy to look at optimising the possibilities with you.

Time has come again for the Income Tax return for the year 2019. In this newsletter you will find some information about the 2019 tax return and other current tax issues that might be relevant to you.

If you supply your 2019 information, we are happy to look after preparation of your tax return. If you have already sent us your 2019 information we will process your 2019 tax return in due course.

As we receive many documents for the preparation of the Income Tax return at the moment, we cannot file all these returns before May 1st. Therefore we automatically request for an extension to submit the declaration. In principle we process the tax returns in the order that we have received the information. If you have a specific reason why the tax return should be filed quicker (for example for a mortgage application) please let us know. We will take this into account in our planning.

Please do not forget to include information about possible deductible expenses and other relevant changes in your situation. This helps us to optimize your declaration as much as possible. We look forward to receiving your response.

Kind regards,

J.C. Suurmond & zn. Tax consultants

Your trusted advisor

Newsletter tax return 2019

• Is a tax return necessary?
• Tax deductions 2019
• Maintenance costs for historic listed buildings
• Legal interest on tax amounts
• End of 30% ruling period
• Tax changes 2020
• Tax free giving to your children and others

Is a tax return necessary?

If the Tax Office issues you with a tax form or letter to request you to do so, this will have to be filed in any case. If you do not receive a letter, but you have to pay additional tax on your income or assets, you are also obliged to file a tax return. Obviously if you are entitled to a refund, it is in your own interest to file one. For a regular domestic tax return the deadline is May 1st. For a migration tax return (M-form) the deadline is July 1st. For both forms extension can be requested if necessary.

This year again we have heard of tax payers who received a letter from the Dutch tax authorities mentioning that they did not need to submit a tax return, although in their particular situation it would have been either mandatory to file a tax return, or they were entitled to a refund. For example a foreign tax payer with property in the Netherlands; in principle in such a situation tax is due and at any rate a tax return should be filed. Furthermore the Tax Office in the main is not aware of your possible tax deductions. We therefore advise to have your refund possibilities checked.

The Tax Office has also mentioned that some details in the prefilled tax return may be incorrect, such as the life annuity premiums. It is always important to check the figures with the underlying documents. By the way, any electronic messages you receive from the Tax Office (Berichtenbox) are still also sent by regular mail.

Tax deductions 2019

In the tax return 2019 you can claim the following personal tax deductions to reduce your taxable income:

• mortgage interest of your first residence
• life annuity premiums (if deposited before 1^st July 2020)
• non-compensated health care expenses (including medical care, prescribed medication, travel expenses for hospital visits);
• financial obligations to an ex-spouse i.e. alimony
• gifts or donations to recognised charities (refer to the ANBI-list)
• study costs
• travel expenses for regular use of public transport between home and work
• weekend expenses for taking care of disabled relatives

The study costs tax deduction will most likely be abolished in 2021; costs paid in 2020 will be deductible in any case.

Do take into account that for some of the mentioned deductions a threshold or other conditions may apply. The expenses may therefore not be fully tax deductible. If you think you had expenses that may qualify and have questions about this, please contact us.

Maintenance costs for historic listed buildings

The deduction for maintenance and renovation costs for listed buildings (in Dutch ‘monument’) was abolished in 2019. A subsidy scheme has taken its place. The application for this subsidy must be submitted before May 1st, with no possibility for extension. For projects for which you already entered into contractual obligations in 2018 but invoices were not paid until 2019, a transitional arrangement applies. If these costs were eligible for deduction in the old tax scheme, they also qualify for the subsidy application. Please note that in order to claim a subsidy, you must be on time.

Legal interest on tax amounts

With the new tax interest rules, from July 1st 2020  the Tax Office will charge interest on potential tax debts for the 2019 tax return. This interest amounts to 4% for the Income Tax and 8%(!) for the Corporate Income Tax. If you expect a high assessment and you want to avoid paying a high interest, please contact us to request a provisional assessment. In case of a tax refund the Tax Office only compensates interest very frugally.

End of 30% ruling period?

In 2018 the maximum duration of the 30% ruling was limited from 8 to 5 years. For existing cases a transitional period of two years was arranged. This transitional period ends at the end of this year. If your 30% ruling was granted before 2016, your 30% ruling will end as per 31^st December 2020. For all cases granted from 2016 onwards the standard 5 year duration will apply.

It is important to assess the consequences of the end of the 30% ruling in your particular case. If the 30% ruling ends this will affect your active income (box 1) as well as substantial shareholdings (box 2) and all other assets in the Netherlands and worldwide (box 3). It may be important for you to know the tax consequences so you can prepare for this. You may also be able to take certain proactive measures this year to mitigate the tax effect. If you share complete information about your situation we will be pleased to check whether we can optimise the results of the 30% ruling with possible effects after the end date.

Tax free giving to your children and others

If you give amounts to your children or other persons in principle you will need to pay Gift Tax. Certain amounts however are exempted. In 2019 the annual tax exempted gift amount to children is € 5.428 (2020 € 5.515) and to other recipients € 2.173 (2020 € 2.208). If your gift exceeded the mentioned amounts it is necessary to submit a gift tax return. Please note that the 30% ruling does not exempt from gift tax.

For gifts in relation to a study or purchase of a property additional tax free amounts apply. From 2017 it is possible again to claim a gift tax exemption of € 100.000 (2019: € 102.010; 2020: € 103.643) if the amount is used for purchasing a house or paying back a mortgage. In these situations it is necessary to submit a gift tax return in order to claim these tax free amounts. In principle the Gift Tax return needs to be done by March 1^st following on the year the gift was made. Let us know if you have not done this yet or if you have any questions about this topic.

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