‘Better, greener, fairer’: tax in 2021
The current coronavirus pandemic has hit the Dutch economy hard. So, in order to try and facilitate recovery, the Dutch government has announced a number of new measures aimed at overhauling the tax system. Below, Viviënne from Blue Umbrella has listed the most important changes and explained how they might affect you.
Dutch government unveils new tax system
The Dutch call their budget day Prinsjesdag (Prince's Day) and the 2021 plan is indeed rich in benefits to help the economy recover from the coronavirus crisis.
Earlier in September, the Dutch government announced a set of measures aimed at creating "a better, fairer and greener tax system", and many will make a big difference, especially to those at the lower end of the income scale.
"This was an important budget for various reasons", said a spokesperson from tax and benefits expert Blue Umbrella. "The government wants to stimulate the economy again, keep people in work or at least retraining for their future career, and make it easier for people starting out – whose chances could have been most affected by the economic slowdown this year."
There are all kinds of measures for different groups, from those in normal employment or wanting to buy their first home to people reaching the retirement age.
A huge number of people will benefit from a reduction in wealth tax from 2021. The Dutch government says that almost a million more people who have savings and investments will not have to pay tax on them anymore in the "Box 3" section of their tax returns.
The first 50.000 euros of your savings or small investments will not be taxed at all, and everyone with savings of up to 220.000 euros will pay less tax on them.
The government will also make it easier for people to make their first investment in a home. If you are between the ages of 18 and 35 and going to buy a first home, then you will not have to pay property transfer taxes at all. If you are 35 or older then you will have to pay a 2 percent property transfer tax, while the rate for investors will rise to 8 percent – a positive change for starters, which could increase their chances of finding an affordable house.
If you are renting a house in the Netherlands and you have a lower income, the housing corporation will take this into account from 2021 to ensure you are paying a rent that is considered suitable. If you, as a tenant, are paying a high rent based on your income, you can also apply for a one-time-only rent reduction.
The basic income tax rate will drop from 37,35 percent to 37,1 percent next year, and you will benefit most if your yearly income is up to 68.507 euros. Employees and self-employed people will benefit from a drop in the income-related combination tax credit compensated by a higher labour levy rebate.
However, self-employed people will get a slightly lower tax credit, falling from 7.030 euros this year to 6.670 euros next year, as part of a broader plan to encourage businesses to employ more staff.
But corporates have better news: in 2021, the basic rate of corporate tax will be lowered from 16,5 percent to 15 percent. This basic tax bracket will be increased for profits of up to 245.000 euros (rather than the current 200.000 euros). In 2022, the basic tax bracket will be increased again to a profit ceiling of 395.000 euros.
Meanwhile, training for employees will be more accessible. After their employment ends, an employee will be able to follow a retraining course at the employers’ expense, and without paying income tax on the costs.
Finally, people who have reached the retirement age and have a yearly income of 49.000 euros or less will also benefit from a higher "elderly" tax discount.
If you are still unsure as to how these changes might affect your personal situation or you have any other tax-related questions, you can contact Blue Umbrella, either by visiting their website or sending an email. You can also give them a call on +31(0)20 4687 560 (Monday to Friday).