The main changes in the Budget Day Plan 2024

It is clear that all politicians’ attention is focused on the upcoming elections. During the night of October 26 and 27, the Dutch House of Representatives unquestioningly approved all bills in the 2024 Tax Plan Package.

In addition, a large number of far-reaching amendments have been adopted to cover certain expenses. In our opinion, the adopted motions once again demonstrate a lack of vision. Hardly any additional favorable tax-saving schemes are created for ordinary taxpayers and the bill falls mainly on enterprising Dutch people.

Please note that the bills and amendments must still be approved by the Senate. The plenary discussion in the Senate will take place on December 11 and 12, 2023, and the final vote will take place on December 19, 2023. Hopefully the Senate will be more critical than the House of Representatives!

Below you will find the key points that were raised after our last newsletter

Increase of the substantial interest tax rate in box 2

The tax rate on dividend income in box 2 will be further increased in 2024. It was already decided that starting from 2024, there would be two tax brackets, with a tax rate of 24.5% for the first bracket up to € 67,000 and for higher amounts a tax rate of 31%. The rate for the second bracket is now being raised to 33%.

Reduction of the excessive lending threshold to € 500,000

If a director-major shareholder borrows more than € 700,000 from its own company, this will be subject to taxation based on the Excessive Lending from your own company act starting in 2023. Below this threshold, there is no excessive lending, and the director-major shareholder will not be charged with additional taxes. The proposal is to lower this threshold amount to € 500,000 in 2024. This could mean that in 2024, you might still face an additional tax.

Tip! Given the previously mentioned increase in the tax rates in box 2 in 2024, it may be advantageous to already take this reduction of the threshold in 2024 into account before the end of this year. It’s possible that the amount of taxes due, which might be caused by this threshold reduction, can be reduced.

Increase in the tax rate on box 3 income from savings and investments

For years, the tax rate on assets in box 3 was 30%, and in 2023 this tax rate increased to 32%. With the amendment, House of Representatives aims to further raise the tax rate to 36% for 2024. This leads to  a total percentage tax rate increase of 20% in just 4 years!!

Abolition of corporate tax deduction for donations to a charity in the corporate income tax act

The deduction for non-businesslike donations under € 100,000 in corporate income tax act will not be abolished, as the outgoing government had previously planned. The deduction will, therefore, remain at a maximum of 50% of the profit and with a maximum amount of € 100,000.

Reduction of the 30% ruling

In addition to entrepreneurs, expatriates are also facing changes. It had already been announced that the 30% ruling would be limited to the so called Balkenende-criteria. Starting from 2024, this ruling will be further reduced. The maximum duration of the 30% ruling will remain at 5 years, but the tax-free allowance will be gradually reduced. The maximum 30% tax-free allowance will only apply for the first twenty months. In the subsequent twenty months, the maximum tax-free allowance will be 20%, and for the remaining twenty months, it will be reduced to a maximum of 10%.

There will be transitional law for existing cases. Employees who were already using the 30% ruling before January 1, 2024, will not be affected by this change.

This amendment was approved despite an earlier recommendation from the Secretary of State to refrain from reducing the 30% ruling. According to the Secretary of State, limiting this ruling may make it less attractive for employees with specific expertise to come to the Netherlands, and this adjustment could have implications for the Dutch business climate.

End of partial non-resident taxation for taxpayers with a 30% ruling

Furthermore, these expatriates will no longer have the option to be considered as a partial non-resident taxpayer. An important consequence of this is that starting from January 1, 2025, they will have to pay taxes on their assets, such as Dutch and foreign bank accounts, savings accounts, and share portfolios, etc., for which they were previously exempted from taxation during the duration of the 30% ruling. However, there will be a transitional law for expatriates who were already using this facility before January 1, 2024. They can, under certain conditions, continue to use the option of being regarded as a partial non-resident tax payer until 2026.

Limited reduction of the Small and Medium-sized Enterprises (SME) profit exemption

To end on a positive note, the reduction of the SME profit exemption is partially reversed. In the Budget Day Plan 2024, it was proposed to reduce the SME profit exemption to 12.7% from January 1, 2024. The current proposal is to “only” reduce the SME profit exemption to 13.31%.

Don’t wait, take action now!

As indicated, the Senate will only decide on Budget Day Plan package and the adopted amendments just before Christmas. Until then, it is uncertain whether all amendments will come into force. Given the short period of time between the vote in the Senate and the end of the year, despite the uncertainty, we recommend that you prepare for this in time and not wait. This prevents last-minute anticipation from becoming impossible, resulting in unwanted tax disadvantages. For more tips on what to do before the end of the year, we would like to refer you to our upcoming Year-End Tips.

Do you need personal advice about the consequences of the above changes for your situation and the possible options? Please contact your advisor at HBK Tax Advisors!