Adjustment of the tax rate in box 1
As per 2024 the basic tax rate in box 1 (including national insurance contributions) will be increased to 36.97% and to 37.05% for 2025. This lower rate will apply to an income up to € 75,624. The maximum tax rate for incomes above that amount remains at 49.5%.

The most important tax credits
Also this year, the labor tax credit will be increased to strengthen the purchasing power of individuals. Working will become more financially rewarding for employees with an income up to €115,000 per year.

Additionally, it will become more attractive for individuals with an income between € 11,000 and € 40,000 per year to increase their working hours.

Furthermore, in 2024, the maximum labor tax credit will be € 5,553 for individuals with an income up to € 39,898. Above this income, the labor tax credit will be reduced by 6.51%.

Every tax payer is entitled to the general tax credit. This tax credit amounts to a maximum of € 3,374 for an income up to € 24,904. In case of a higher incomes this tax credit will be reduced by 6.652% with a minimum amount of nil.

Since 2023, the reduction is determined based on the combined incomes of box 1, box 2, and box 3, rather than solely on income from employment and home ownership (box 1).

Profit exemptions for entrepreneurs
The SME (Small and Medium-sized Enterprises) profit exemption will be reduced from 14% to 12.7%. This exemption lowers the taxable profit. As a result, the entrepreneurs will pay more taxes. According to the Dutch government, this measure contributes to reducing the difference in tax treatment between employees and entrepreneurs in income tax.

Additionally, the self-employed tax deduction (“zelfstandigenaftrek”) will be further reduced. In 2024, the tax deduction will be reduced to only € 3,750. For the years 2025, 2026, and 2027, it will decrease further to € 2,470, € 1,200, and € 900, respectively. It appears that entrepreneurs are the major victims once again.

Limitation of depreciation for property for own use
Depreciation on company buildings is only possible if the book value of the building is higher than the base value. For the income tax, this base value of the investment property is 100% of the WOZ (Valuation of Immovable Property Act) value, while for company buildings for own use, it’s 50% of the WOZ value. As of January 1, 2024, this difference will be eliminated, and for all situations the depreciation is only possible until the base value of 100% of the WOZ value is reached. For the corporate income tax, this difference has already been eliminated since 2019.

Random Depreciation of Business Assets in 2023
For new business assets for which an investment obligation is agreed on in 2023 and which will be used before January 1, 2026, there is a one-time opportunity in 2023 to depreciate them randomly for up to a maximum amount of 50% of the purchase price. Regular depreciation will be applied on the remaining book value in the following years. By depreciating assets randomly (accelerated depreciation), a liquidity advantage can be obtained. This scheme applies to both income tax and corporate income tax. Some business assets are excluded from this scheme, such as buildings, non-zero-emission passenger cars, or assets intended for rental.

Are you planning on making significant investments? If so, do it in 2023 and do not postpone it to the next year as this can give you a liquidity advantage.

Note: This scheme was already announced last year and already came into force as per January 1, 2023. However, it will not be continued in 2024.

Box 2 tax rate
For substantial interest shareholders (shareholders with an interest of at least 5% in a BV – private limited company), income from the BV (such as dividend income) is taxed in box 2.

In 2023, the tax rate is 26.9%. Starting from 2024, two tax brackets will be introduced: 24.5% for an dividend income up to € 67,000 per taxpayer (€ 134,000 for fiscal partners), and a tax rate of 31% for the exceeding amount.

Do you have the intention to take out dividend income from your own BV? It may be advantageous to do so in 2023 instead of postponing to 2024!

Correction for undesirable outcome in collection of protective assessment in case of excessive lending
In the case of emigration by a substantial interest shareholder, there may be a deemed capital gain for which a protective assessment has been imposed. The collection of this assessment only takes place when there is a selling of the shares, dividend distribution, repayment of capital, or (since the introduction of the excessive lending act) excessive lending in relation to the substantial share interest for which this conservatory assessment has been imposed.

However, with regard to excessive lending, an undesirable situation may arise if a substantial interest shareholder borrows excessively from a newly established (non-Dutch-based) company after emigration. This could also results in the collection of the protective assessment. The proposed correction aims to prevent this undesirable outcome.

Additionally, the deferral will also not be withdrawn if an increase of the debt has not previously led to the withdrawal of the deferral of payment. With these proposed changes, which will be retroactively come into force as per January 1, 2023, substantial interest shareholders who migrated will be treated in the same way as substantial interest shareholders residing in the Netherlands.

Postponement of the introduction of the new box 3 tax system
The outgoing government aims towards taxation of assets based on actual returns of investments  with a main rule being: a taxation of the increase of the value of the capital and, for certain exceptions, such as real estate and specific categories of shares, a tax on capital gains. The introduction of this new box 3 tax system is further postponed from 2026 to 2027. Until the implementation of this new system, the box 3 temporarily transitional act introduced in 2023 will continue to be of force. We will keep you updated on all new developments.

Status of procedures on the box 3 recovery act/ transitional act box 3
In one of the ongoing cases before the Dutch Supreme Court regarding the application of the deemed return of investment, the Advocate General has issued an opinion. In this opinion, he indicates that the box 3 recovery act does not offer sufficient compensation for the category “other assets” and that the arbitrariness of the deemed return of investment has, in his view, increased rather than decreased.

He also notes that taxation based on an average investment return will always discriminate a taxpayer with a lower actual return on investments.

The Advocate General suggests to the Dutch Supreme Court to introduce and formulate a tolerance margin between the actual and deemed return of investment. This margin would determine whether the provided compensation is adequate or if taxation should be based on the actual return of investment.

The Dutch Supreme Court has not yet come with a verdict, and it is not guaranteed that they will follow the Advocate General’s recommendation. Due to the uncertainty about the sustainability of the box 3 transitional act, we advise you once again to keep careful records of all income and expenses related to your box 3 assets. It seems increasingly likely that a rebuttal ruling will be introduced, allowing situations with a lower net return of investments will be taxed than is currently determined based on the deemed calculation method.

Adjustments to box 3: refinements and clarifications
Based on the recovery act box 3, assets and liabilities in box 3 are divided into three categories: bank , savings and deposit accounts, other assets, and liabilities, with each category having its own deemed return rate. The outgoing government has proposed the following refinements:

1. With retroactive effect from January 1, 2023, the share of a homeowners’ association (VVE) will be part of the category of bank, savings and deposit accounts and no longer part of the category other assets.
2. Similarly, the share of funds held in a third-party account with a notary or bailiff will no longer being classified under the category of other assets, but in the category bank, savings and deposit accounts.
3. Elimination as part of box 3 of mutual claims and debts between fiscal partners and between parents and minor children. This means that these claims and debts no longer need to be included in the income tax return.
4. Clarification of the calculation method for the effective deemed return rate for fiscal partners.

These refinements and clarifications aim to provide greater precision and fairness in the taxation of assets and liabilities in Box 3.

Adjustment of the tax rate of box 3
In contrast to what was agreed on in the tax plan 2023, the tax rate in box 3 will, strangely enough, be increased more rapidly, reaching 34% in 2024. Originally it was agreed on that the tax rate of 34% will come into force in 2025.

No adjustment of the tax-free threshold on assets
Every taxpayer has a tax-free threshold amount on assets in box 3. If the value of assets is lower than the tax-free threshold, no taxes are due. For 2023, the tax-free threshold was € 57,000, and in general  this amount is indexed annually. However, to our surprise, the tax plan 2024 proposes not to adjust the tax-free threshold amount on assets for 2024.