Budget Day 2021
This article was published in our HBK newsletter
Last Tuesday was Budget Day (Prinsjesdag) which, by tradition, always falls on the third Tuesday of September, when our outgoing Cabinet presented the budget for 2022. A highlight of the year for every tax specialist… but generally less so for the taxpayer. So it’s important to take note and be smart! How will the announced measures affect you and what do they mean for your wallet? Will your business be able to cope with them? Here is an outline of the main points.
- The income tax rates for 2022 will change slightly. The basic rate has been cut from 37.10% to 37.07% (for pensioners: from 19.20% to 19.17%). The top rate will remain 49.5% and apply to incomes in excess of €69,398 (€68,507 in 2021).
- The maximum amount of the income-related combination tax credit (IACK) for parents who both work and have a child under the age of 12 will be cut by €395 from 1 January 2022.
- There will be an exception in the application of the IACK to the tax partner principle for people who are not resident in the Netherlands. At the moment these foreign taxpayers are sometimes entitled to claim the IACK when a national taxpayer in the same situation would not be able to. This unintended favouring of foreign taxpayers relative to domestic taxpayers will therefore be abolished.
- When a property with surplus value (equity) is sold, this creates a home equity reserve (EWR) which limits the amount of the new owner-occupied home loan (mortgage) and thus the deductible interest. The home ownership scheme will be amended in relation to the EWR to remove unintended interest deduction restrictions in certain situations relating to partners or death.
- The support percentages in the Environmental Investment Scheme (MIA) will be increased as of 1 January 2022 from 13.5%, 27% and 36%, to 27%, 36% and 45%, respectively.
- From 2022 study costs and other educational expenses are no longer tax deductible in the income tax return. Instead, a subsidy scheme (STAP) will be introduced. From 1 March 2022, the STAP budget can be applied for at the UWV.
- From 2022 an untaxed allowance of up to €2 per full day (or day part) may be granted for working from home. An untaxed travel allowance for commuting may not be given for the same day.
- The tax-free budget for the work-related costs scheme was temporarily increased in 2020 and 2021 as a pandemic support measure. It is still unclear whether this temporary increase will be extended to 2022.
- The Cabinet is proposing to change the tax regime for share option rights. Under the present legislation the benefit that an employee derives from an option right is taxed at the moment when the share options are exercised. Irrespective of whether the shares are tradeable or not (and therefore whether any money is actually released), wage tax must be remitted. From 2022 it will be possible to defer the tax until the moment when the shares become formally tradeable. Please note: financially this can be a disadvantage if the shares increase in value.
- It has been proposed that the procedures surrounding the WBSO (R&D) scheme be simplified and clarified. The application procedure will be simplified such that R&D statements can overlap each other. Reporting of the costs incurred will be clarified.
- The nominal addition for electric cars in the more expensive segment will be tightened up from 1 January 2022. The discount percentage (6%) will not change, the maximum list price to which this discount may be applied, however, will change. This will be cut to €35,000 from 2022 and to €30,000 from 2023.
- The temporary measure which allows Directors/Major Shareholders (DGAs) of innovative start-ups to set their customary salary at the level of the minimum wage has been extended until 1 January 2023.
- The rates for corporation tax will remain the same. The first tax band will be widened, however, to €395,000. This means that the first €395,000 in profit will be taxed at a rate of 15%, while the rate on anything above that is 25%. The rate difference may make it advantageous to break up a tax entity for corporation tax purposes.
- From 1 January 2022, dividend tax withheld from dividends received in connection with a shareholding of less than 5% can only be offset to the extent that the company would have to pay corporation tax. Offsetting dividend tax, therefore, can no longer lead to a tax rebate. Similarly, the tax set-off on games of chance when a game which forms part of the company’s activities is won, will be limited to the corporation tax (VPB) to be paid. Dividend tax or tax on games of chance that has not been offset can be carried forward to future years.
- The environmental investment deduction will be increased. Please see the above section on Income Tax for further details.
- Although it was not included in the tax plan, we note that it was decided earlier this year that the loss relief for corporation tax purposes will change from 1 January 2022. Loss carry-back will still be limited to one year. But from 1 January losses may also be offset against profits in future years with no limitation (the six year period will lapse). However, only losses up to a maximum of €1,000,000 may be offset. If the profit is higher, a maximum of 50% of this profit may be set off (provided that the losses are sufficient, of course). As a result, companies with large profits will always pay corporation tax in profitable years. This new rule will also apply to losses incurred in previous years.
Property transfer tax (Stamp Duty)
- A first-time buyer on the housing market under the age of 35 buying a house for less than €400,000 who intends to live in the property themselves (main residence criterion) will be exempt from stamp duty (property transfer tax).
- Buying a property for self-occupancy to which the first-time buyer’s exemption does not apply, is subject to 2% stamp duty. It has been laid down that in the event of sudden death, divorce, posting abroad or other unforeseen circumstances, either the 2% rate or the first-time buyer’s exemption will still apply even though the ‘main residence’ criterion will not be met in the period that the purchase agreement has been concluded but the house has not actually changed hands.
- To prevent abuse of the first-time buyer’s scheme it is stipulated that the acquisition of appurtenances must also be included when determining whether the threshold property value of €400,000 has been exceeded. In practice, it appears that in some cases ownership of a property was split in order to avoid exceeding this limit on the property value.
- The landlord levy will be cut from 1 January 2022 from 0.526% to 0.485%.