Changes to the Dutch Tax Code for 2021: How Will You Be Affected?
Every September, the Dutch government publishes a list of changes to the national tax code and budget. The changes reflect the needs of the government, population, and country. This announcement occurs on Prinsjesdag or (translated loosely) the prince’s day. It is an age-old tradition and, on this day, all eyes are pointed toward Den Haag. With this article, alongside our partner Blue Umbrella, we’ve summarized the list of important changes that will most likely affect you or your company as the government seeks “a better, fairer and greener tax system”. All in all, the 2021 tax code seeks to assist those at the lower ends of the income scale in a year of particular employment and fiscal volatility.
Changes to Levies (Taxes) on Savings and Investments
As you are maybe aware, the Dutch tax code involves paying a wealth tax. This is a tax on your worldwide savings and investments. In 2020, one was expected to pay tax on any and all savings and investments above €30.000. This amount was €60.000 combined for fiscal partners (what’s known as box 3 items). In 2021, this will be updated. Therefore, people with savings and investments of €50.000 (€100.000 for fiscal partners) or less will be exempt from any taxes or levies on those assets. Furthermore, the amount of tax to be paid on savings and investments between €50.000 to €220.000 will be reduced.
Changes to the Income Tax for Employees and Sole Proprietors (ZZP)
Those earning €68.507 or less were paying an income tax of 37.35% in 2020. In 2021, this will be slightly reduced to 37.1%. For profits (for sole traders) or income (employees) above €68.507, the tax rate remains the same (49.50%).
Furthermore, in the Dutch tax system, there exists a general tax credit (algemene heffingskorting/ arbeidskorting). This reduces the total amount of income tax you will pay. For those earning below €68.507, the tax credit will increase and so you should expect to pay less. For those earning above €68.507, this tax credit will not increase in 2021.
Also, in 2021 the self-employment discount will be lower. At the moment, this is €7.030 and will become €6.670.
Good News for Corporations
Currently, companies are paying a corporate tax in the Netherlands of 16.5% on profit between €0 – €200.000 euro. This is the lower tax bracket (Opstaptarief). In 2021, the corporate tax will be lowered from 16,5% to 15% on a profit of up to €245.000. The lower bracket corporate tax remains at 15% in 2022 and the bracket limitation will be increased to €395.000 in 2022 as opposed to €245.000.
The government is also encouraging companies to invest with discounts, the Brk (De Baangerelateerde investeringskorting). It is temporary ruling as to ensure that companies are able to invest in uncertain times like this; for example, an investment in new materials and/or technology.
Removal of Taxes on Training for Employees Who Have Been Let Go
Due to the corona crisis, many have lost their jobs. In such cases, employers tend to be responsible for providing training (or a training budget) to employees who have been terminated. Generally speaking, that employee was expected to pay income tax on this amount. In 2021 this is not be taxed. It is meant to encourage the re-skilling of the Dutch labor force in response to the pandemic.
Changes Affecting the Elderly and Retirees
People who have reached retirement age and who earn €49.000 or less per year will receive a higher “elderly” discount (ouderenkorting) in 2021. This means they will pay a lower tax overall.
Changes Affecting Real Estate and Housing
Great news for new young homeowners
In a move to encourage first-time homeowners, the Dutch government has decided to remove the 2% transfer tax entirely. This is applicable for those between the ages of 18 and 35. For those above 35, it remains. Investors, however, will be faced with an 8% transfer tax. This is a 2% increase from 2020.
Changes for renters
In the event, you are renting a property and your income is less than or equal to €23.225 (one person) or €31.475 (two people) per household, you may be eligible for a one-time rent reduction. This assumes that you are paying a high amount of rent in relation to your income.