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Budget Day 2017 - Proposed measures in the Income and Wage tax

Last updated: 06-10-2017

6 October 2017

On Budget Day (Prinsjesdag), 19 September 2017, a package of tax measures have been presented as part of the budget for the coming year. We provide an overview of the measures relating to individuals, employees and employers below.

Income tax

Income tax rates and taxbrackets

The tax brackets will be slightly extended, indicating that the last bracket starts at an income of € 68,507 as per 2018. Furthermore, the tax rates of the second and third bracket are increased with 0,05%. Please find the rates and tax brackets, as per 1 January 2018 below.

Tax Brackets - up to state pension age Combined tariff
2018 2017 2018 2017
€ 0 - € 21,142  € 0 - € 19,982  36.55% 36.55%
€ 20,142 - € 33,994  € 19,982 - € 33,791  40.85%  40.80%
€ 33,994 - € 68,507  € 33,791 - € 67,072  40.85%  40.80%
As from € 68,507  As from € 67,072  51.95%  52.00%
Tax Brackets - state pension age and older Combined tariff
2018 2017 2018 2017
 € 0 - € 21,142  € 0 - € 19,982  18.65% 18.65%
 € 20,142 - € 34,404  € 19,982 - € 34,130  22.95% 22.90%
 € 34,404 - € 68,507  € 34,130 - € 67,072  40.85%  40.80%
 As from € 68,507  As from € 67,072  51.95%  52.00%

 Levy rebates

The following adjustments to the levy rebates have been included in the Budget Day measures.

Heffingskortingen 2018 2017
Maximum general levy rebate up to state pension age € 2,265  € 2,254
Maximum general levy rebate state pension age and older  € 1,157 € 1,151
Reduction rate general levy rebate (income dependant)  4.683% 4.787%
Maximum employment rebate  € 3,249 € 3,223
Reduction rate employment rebate  3.60% 3.60%
Build up percentage employment rebate  28,067% 28.317%
Maximum income dependant combinate tax rebate  € 2,801 € 2,778
Young disabled rebate  € 728 € 722
Old age tax rebate (low income / high income)  € 1,418 / € 72 € 1,292 / € 71
Single old-age tax rebate  € 423 € 4

 Adjustment partner definition

A (foster)child under the age of 27 cannot be qualified as a partner for income tax purposes or allowances of his father or mother. An allowance can be received for a foster child, after which under circumstances, the parent and the foster child can be qualified as partners. It has been proposed that, in order to avoid this unwanted situation, a request can be filed to prevent being treated as partners.

Lowering energy investment deduction

The Energy Investment Allowance (EIA) is a tax-relief program. Entrepreneurs/companies that invest in energy-saving installations, or that make use of sustainable energy, may deduct a certain percentage of the invested sum from their taxable profits from the year in which the goods are purchased. This percentage will be lowered with 0.05% as of 2018.

Extension of gift deduction multiplier

The multiplier for the deduction of gifts to culturald institutions also applies in the coming year.

Wage tax

Abolish deemed employment non-executive directors

Deemed employment for non-executive directors of a listed company will be abolshed. This results in equal treatment of supervisory board members and non-executive directors of a listed company. Deemed employment for supervisory board members had already been abolished by law as per 2017. An executive director of a listed company and of a non-executive company remain to fall within the scope of wage tax.

Adjustment excessive severance pay

The exemption to the rule for calculating excessive severance pay relating to share option rights will be limited to share option rights that are awarded unconditionally or that have become unconditional before the calendar year prior to the year in which the employment has been terminated. An excessive severance pay is subject to 75% wage tax, borne by the employer.

Limiting levy rebates for foreign taxpayers in payroll

It is proposed to only apply the tax part of the levy rebates to which non-qualifying non-resident taxpayers are entitled to in the payroll administration as per 2019 for all non-resident taxpayers. Qualifying non-resident taxpayers (taxpayers from the EU, EER, Switzerland or the BES-islands and earning more than 90% of their income in the Netherlands) may claim the remaining tax credit to which they are entitled to through their personal income tax return.

Joint R&D statement possible

It is proposed to grant R&D withholding agents the opportunity to report the number of hours spent on research and development activities as well as costs and expenses incurred jointly for all R&D statements granted in a calendar year.

Lowering R&D budget

Due to exceeding the 2016 R&D budget, the minister of Economic Affairs intents to lower the R&D budget 2018 to € 1,163 million (this was originally set at € 1,205 million). In addition, it is expected to lower the first bracket for the R&D deduction (R&D wage up to € 250,000) to 31% (was 32%) and the second bracket (R&D wage as of € 350,001) to 14% (was 16%).

Contact

Should you have questions on the above or otherwise, please contact us via e-mail or call us at our office in Amsterdam at + 31 20 570 9440 or our office in Rotterdam at + 31 10 201 0466