30% ruling becomes 27% ruling
The 30% ruling is a tax benefit for foreign employees in the Netherlands, allowing employers to provide up to 30% of the salary tax-free to cover extraterritorial costs, such as double housing. As of January 1, 2024, this scheme was scaled back with the introduction of the 30-20-10 scheme. This scheme means that expats had their entitlement to tax-free reimbursement reduced by 10% every 20 months over a five-year period. However, this reduction is now being partially reversed. Starting January 1, 2027, the maximum tax-free reimbursement will be reduced to 27% instead of 30%. Employees who started using the 30% ruling before 2024 fall under transitional law and retain the right to a 30% tax-free reimbursement for the entire duration of their 30% ruling.

Increase of the  income requirement for the 30% ruling
To cover the costs of reversing the cutbacks, the income requirement for the 30% ruling will be increased. As of January 1, 2027, the minimum income requirement will rise from € 46,107 (2024) to € 50,436. For employees under the age of 30 with a master’s degree, the income requirement will increase from € 35,048 (2024) to € 38,338. Due to this increase, fewer foreign employees will qualify for the 30% ruling.

Change in conditions for international transfers of pension
The Dutch policy on international aspects of pension value transfers has been adjusted following rulings by the European Court of Justice on November 16, 2023. The Court ruled that the Netherlands unjustly imposed requirements on international value transfers, specifically that buyout options abroad could not be more lenient and that pension providers had to accept liability for Dutch taxation. Both requirements restricted the free movement of workers and have therefore been abolished as of November 16, 2023.

Corporate income tax rates unchanged for 2025
No changes have been proposed for the corporate income tax rates (CIT) and brackets in 2025. Similar to 2024, the lower tax rate of 19% will continue to be applied in the first bracket with taxable profits up to €200,000. For profits above this threshold amount the tax rate remains at 25.8%.

Restriction of tax deductions for donations
In both personal income taxes as well as the corporate income taxes, a deduction is available for donations made to public charity organizations (ANBIs) or social interest organizations (SBBIs). In the corporate income tax law, these so-called non-business-related donations are tax deductible up to a maximum of 50% of the taxable profit, with a maximum of € 100,000.

The Tax Plan 2025 proposes to abolish this donation tax deduction in the CIT for a tax year starting on or after January 1, 2025. Therefore, if you would like to use this tax deduction, you must make your donations before the end of this year!

Additionally, the regulations in the dividend tax and personal income tax related to “giving from the company” will be eliminated as of January 1, 2025. As a result, donations made from a company (on the initiative of the director-major shareholder) which are considered as dividend income will no longer be exempted from taxation in box 2 and dividend tax. Therefore, if you like to make a donation from your private limited company (BV) and benefit from the tax advantage, you should make your donation this year.

To clarify: business-related donations, such as those made for sponsorships and advertising for charitable purposes, will remain tax deductible from taxable profits.

The possibility for a tax deduction on made donations in income taxes will be maintained without any cutbacks.

Adjustment of the liquidation loss regulation
The liquidation loss regulation in the corporate income taxes (CIT) essentially provides an exception to the participation exemption. This means that a loss incurred upon the liquidation of a participation is tax deductible in the CIT, provided certain conditions are met.

The Tax Plan 2025 proposes two changes to the liquidation loss regulation:

1. Adjustment of the calculation of the purchase price of the participation. Also previously claimed depreciation losses on a loan which at a later stage will be part of a taxable profit, without the taxpayer having formed a related (revaluation) reserve will be part of the purchase price.
2. Amendment of the intermediate holding company provision

Evidence shows that in certain situations it is possible to convert a non-tax deductible loss on sales on an indirectly held participation into a deductible liquidation loss on a directly held participation. This is against the purpose and intent of the liquidation loss regulation.  It is proposed to eliminate this possibility.

Abolition of the reduced VAT rate on art, culture, books, sports, and hotel stays
The government proposes to abolish the reduced VAT rate of 9% on art, (digital) books, magazines, sports (including swimming pools, gyms, and sports events), museums, music and theater performances, and artist appearances, replacing it with the general VAT rate of 21% as of January 1, 2026.

This VAT increase will also apply to the rental of hotel rooms, furnished holiday homes, mobile homes, and short-term accommodation for asylum seekers, workers, the homeless, and students. An exception to this rule is the rental of camping sites with a tenant with its own tent or caravan who stays for a short period. In that situation, the reduced VAT rate of 9% will still be applicable.

The reduced VAT rate will also still be applicable for amusement parks, playgrounds, ornamental gardens, circuses, zoos, and cinemas.

VAT adjustment for real estate investment services
In the Tax Plan 2025 the government proposes – starting January 1, 2026 – to introduce a VAT adjustment scheme for investment services related to real estate. This requirement will apply to investment services with a value exceeding the amount of € 30,000 per service.

There is already a VAT adjustment scheme for investments in movable and immovable property. This scheme states that the usage of movable investment goods is monitored for four years and for buildings for nine years after the year they are put into use.

If the usage of the investment good changes during this period (e.g., from VAT-taxable use to VAT-exempt use or vice versa), it can affect the VAT deduction. Previously deducted VAT may need to be adjusted, meaning you may have to repay a part of the VAT (if the use changes from VAT-taxable to VAT-exempt) or reclaim VAT (if the usage changes from VAT-exempt to VAT-taxable). 

Investment Services
Currently, there is no adjustment scheme for investment services related to buildings. For example, at present, you can renovate a property, rent it out temporarily with VAT, and fully deduct the VAT on the invoices. If these properties are later rented out under a VAT exemption, the VAT deduction does not need to be adjusted.

To prevent such arrangements, it is proposed to extend the adjustment scheme as of January 1, 2026, to investment services related to real estate with a sustainable and long-term character, such as renewal, replacement, maintenance, and repair. The adjustment of VAT on services like cleaning will not be affected by this proposal. This measure is expected to have a significant impact on property owners, as they will now need to monitor the use of investment services for five years.

This VAT adjustment scheme will apply to all investment services put into use from January 1, 2026. If you use an investment service before January 1, 2026, this adjustment scheme will not apply.

However, it remains to be seen whether an adjustment period of five years, instead of ten years, is in line with recent court verdicts by the European Court of Justice.

The Transfer Tax Rate is Being Reduced
As already previously announced in the media, the general transfer tax rate for property investors (who do not intend to occupy the purchased property themselves) will be reduced from 10.4% to 8%, as of January 1, 2026. This reduction aims to make the real estate market more accessible to investors, who play a vital role in providing rental properties and commercial spaces. Additionally, the government hopes this measure will stimulate the circulation within the real estate market.

The reduction in transfer tax rate applies to investors purchasing real estate that will not be used as their primary residence. This includes:

• Landlords who provide properties for the rental market.
• Investors in commercial real estate, such as shops, offices, and business premises.
• Real estate funds and other investors purchasing properties for investment purposes.

It is important to note that this reduced transfer tax rate does not apply to private buyers who purchase the property with the intention of their own usage. For these buyers, the lower transfer tax rate of 2% remains in effect.

If you are planning to invest in real estate, now is the time to consider the implications of this transfer tax reduction in your strategy. The reduction can lower your purchase costs, thereby improving your long-term return of investments (in box 3 or box 2).

We recommend reevaluating your investment portfolio to explore the opportunities this reduction can give to you. If needed, we can assist you in calculating the potential impact.

What you need to know about the ‘adjustment of fiscal business succession facilities 2025’ Bill

On Budget Day, the State Secretary submitted the bill for the adjustment of the fiscal business succession facilities 2025 to the House of Representatives, as part of the Tax Plan 2025 package. Most of the law is intended to come into effect on January 1, 2026. This proposal aims to modernize and make the current schemes for business succession in gift and inheritance tax fairer. Business succession is a key topic for many family businesses and entrepreneurs, and these changes could have a significant impact. In this newsletter, we summarize the key points for you.

Why These Adjustments?
The current business succession facilities (BOF) provide entrepreneurs with tax benefits when transferring a family business to the next generation, such as a reduction in tax liability. However, there has been criticism regarding the effectiveness and fairness of these schemes. This bill aims to make the scheme more transparent, simpler, and better aligned with contemporary business practices.

The Main Changes
Restriction of access to the BOR and DSR ab (deferral arrangement for substantial interest)

• Substantial interest shareholders owning at least 5% of the ordinary shares of the issued capital, with or without voting rights, qualify for the business succession relief (BOR) and the DSR ab. This change disconnects the substantial interest definition for share of special kind and derivatives. An exception is made for an interest, with or without substantial interest, of a partner and direct descendants of a first family shareholder with a 25% stake in a company (that operates a business).
• The BOR and DSR ab also apply to the usufruct or ownership without usufruct of the aforementioned interest in ordinary shares, directly or indirectly held preferred shares in the context of phased business succession, and diluted indirect interests.
• Substantial major-shareholders with an interest less than 5% of the issued capital are considered investors. In principle, they do not qualify for the BOR or DSR ab.
• Excluded from the BOR and DSR ab will be: options on shares, profit-sharing certificates, substantial interests based on the drag-along and tag-along rules, a deemed substantial interest, and membership rights of cooperatives and tracking stocks.
• Business assets used for both business and private purposes (mixed use) may, at the owner’s discretion, be allocated as business equity or private equity (assets of choice). These assets of choice which are allocated as a business will qualify as business assets for the BOR/DSR only to the extent they are actually used within the company. It is not always easy to determine if an asset is used for business or private purposes. For efficiency reasons this new regulation will apply to assets with a value of at least € 100,000 and business usage of less than 90% at the time of the donation or inheritance of the business.

Abolition of the employment requirement for the DSR
The employment requirement for the DSR will be abolished. The employment requirement currently mandates that, in case of a gift, the successor must have been employed by the company for at least 36 months. This requirement will be eliminated as of January 1, 2025. A minimum age of 21 will be introduced for both the BOR and the DSR in the case of a gift. However, this minimum age does not apply in the event of inheritance.

Abolition of the efficiency margin
As of January 1, 2025, the 5% efficiency margin in the BOR and DSR will be abolished. For the BOR the effective date for the application is January 1, 2025). For DSR, the exact date is yet to be determined. The 5% efficiency margin means that if the investment equity of the company is less than 5% of the company equity this investment equity qualifies for the BOR and DSR.

Easing of the possession and continuation requirements for BOR
These easing’s concern the so-called possession requirement for the donor or testator and the continuation requirement for the recipient. With these easing’s, a large portion of the practical issues are addressed. In addition to shortening the continuation period from five years to three years, effective from January 1, 2025, for acquisitions from that date, more options for legal restructurings will be introduced. The proposal seeks to extend the regulatory allowances, ensuring compliance with the continuation requirement in various situations. 

Handling of  ‘so called walker investments’
Usage of the BOR will be subject to stricter conditions in situations where a person at a (very) advanced age starts a business, purchase a stake in a company, or purchase a substantial share interest in a company. According to the government, these situations do not represent genuine business succession. This measure will extend the possession period in such cases. For entrepreneurs who start a business (or acquire a stake) more than two years after reaching the state pension age, the possession period will be gradually extended (by six months for each additional year)[1].

Handling of double-BOR constructions
With this measure, the government aims to prevent the BOR from being applied more than once to the same business. This is possible, for example, if someone donates a business by opting for the BOR, repurchases the business after the continuation period with investment assets, and then donates it again using the BOR after the new continuation period ended. The proposed measure excludes the application of the BOR insofar as the business has been owned by the recipient at any previous point. This measure applies regardless of the relationship between the transferor and the recipient. Notably, it is irrelevant whether the BOR was applied during the first transfer. If the BOR was not applied during the first transfer, there is no case of double application.

What Does This Mean for You?
If you plan to transfer your business to the next generation, or if this topic plays an important role in your business, it is crucial to stay informed of these developments. The proposed changes may affect how you plan and execute your business succession. Therefore, it is advisable to seek legal or tax advice where necessary to anticipate the upcoming changes.

Do you have questions or would you like more information on how this bill may affect your specific situation? Feel free to contact us. We are happy to assist you further.

[1] The explanation provides the example of a person who turns 69 on January 1, 2026, and starts a business the following day. If this entrepreneur then passes away at the age of 80, the standard possession period of one year is extended starting from the age of 69 (state pension age + 2 years) until the time of death, over a span of 11 years, with an additional half-year for each year. This would result in a total possession period of 6.5 years (1 year + 0.5 x 11 years = 6.5 years).