Prinsjesdag 2024 

On Prinsjesdag (the annual opening of the Dutch parliamentary year), the new Dutch government presented the Tax plan 2025 (Belastingplan 2025), outlining numerous relevant proposals for businesses and employers. Key changes include the reintroduction of a third tax bracket, adjustments to tax credits, modifications to the group concept for withholding tax (bronbelasting), and the continuation of the 30% ruling in a revised form. These plans are subject to parliamentary approval before becoming final. Below is a summary of the most important proposals. Curious about how this might affect your organization? Contact your Crowe Peak advisor. 

Reintroduction of the third tax bracket 

In the Dutch Tax plan 2025 a third income tax bracket for the income tax (inkomstenbelasting) will be reintroduced. The first bracket will have a tax rate of 35.82%, followed by a second bracket at 37.48%, while the top rate of 49.50% will continue to apply to incomes over €76,817 per year. The reintroduction of this third bracket aims to create a more differentiated tax structure and is intended to ease the tax burden on lower-income groups. For employers, this is particularly relevant as it could impact income distribution within their organizations. 

Adjustment and possible elimination of tax credits 

The Tax plan 2025 will also revise various tax credits (heffingskortingen), including the general tax credit (algemene heffingskorting), labor tax credit (arbeidskorting), income-dependent combination tax credit (inkomensafhankelijke combinatiekorting), and the elderly tax credit (ouderenkorting). These adjustments are primarily aimed at encouraging labor participation and easing the tax burden on lower incomes. For companies, this could mean that employees with lower incomes will take home more net pay, potentially reducing overall payroll costs. At the same time, higher earners may benefit less from these credits, possibly affecting total compensation packages. Employers in the Netherlands should carefully monitor their salary policies and the net incomes of their staff. 

Amendment of debt remission profit exemption 

The proposed changes to the debt remission profit exemption (kwijtscheldingswinstvrijstelling) aim to remove fiscal barriers during business reorganizations. Currently, in the Netherlands, waived debt is taxed unless certain conditions are met. However, for companies with carry-forward losses exceeding €1,000,000. – the exemption for waived debts above this threshold is limited, potentially leading to an unexpected tax burden during reorganizations. The new proposal ensures that waived debt will be fully exempt from tax, regardless of the amount of losses, giving companies more flexibility during financial restructuring. 

“A technical adjustment that offers a significant solution for insolvency practices,” – Hans Missaar, Senior Partner Tax & Legal. 

Expansion of the earnings stripping rule 

The Dutch government plans to increase the earnings stripping rule (earningsstrippingmaatregel) from 20% to 25% to align Dutch policy with the European average and enhance the investment climate. Additionally, an anti-fragmentation measure is proposed to prevent taxpayers from splitting assets across multiple entities to exploit the interest deduction multiple times. For real estate entities, the threshold of €1,000,000 will not apply when calculating taxable profits, further limiting interest deduction and reducing tax optimization opportunities through asset splitting. 

“For real estate companies renting properties to third parties, this measure will significantly impact the deductibility of interest expenses, leading to a higher tax burden.” – Hans Missaar, Senior Partner Tax & Legal. 

Mandatory application of withholding exemption 

Currently, companies in the Netherlands may choose to apply a withholding tax exemption (inhoudingsvrijstelling) in cases of shareholdings. The Tax plan 2025 proposes to make this withholding exemption mandatory to ensure that dividend recipients (shareholders) are no longer dependent on the paying entity’s choice to apply for the exemption. If this proposal passes, shareholders will be able to object if the withholding exemption is not applied when it should have been. 

New definition for “group” in the context of Dutch withholding tax 

Since 2021, the Netherlands has imposed a withholding tax on interest and royalty payments to related entities in low-tax jurisdictions. From 2024, dividends will also fall under this tax. Previously, the term “cooperating groups” (samenwerkende groepen) was used to determine whether a qualifying interest existed. However, this approach has proven inadequate, particularly when investments involve foreign partnerships. To address this, the concept of a “qualifying entity” (kwalificerende eenheid) will be introduced, focusing on groups acting together to avoid withholding tax. This adjustment primarily targets tax avoidance structures. 

Reduction of real estate transfer tax for investment properties 

The Schoof government proposes to lower the real estate transfer tax for non-owner-occupied residential properties from 10.4% to 8%, effective January 1, 2026, to stimulate investment in rental properties. 

Simplified legal merger 

A “technical” amendment to Dutch tax law is planned for 2025 regarding the simplified legal merger (vereenvoudigde juridische fusie). While such mergers are already possible under civil law, they involve no issuance of shares, which current tax law assumes occurs. By explicitly allowing for this simplified merger, the government aims to prevent practical issues and legal disputes. 

“This change may seem minor but can significantly help companies restructure more efficiently without post-merger tax complications. It demonstrates how the law adapts to practical business needs.” – Joachim Eendebak, Head of Legal. 

30% ruling remains but adjusts to 27% 

International employers should prepare for changes to the 30% ruling (30%-regeling). A previous reduction to a 30-20-10% structure will be reversed. The 30% tax-free allowance will remain in place until 2026, after which it will decrease to 27%. Additionally, salary thresholds will rise to €50,436, and for young professionals with a master’s degree, to €38,338 (2024), with annual indexing. Employees who received a 30% ruling before 2024 continue to be entitled to 30% and remain subject to the existing salary criteria under transitional rules.

“This adjustment retains the tax-free allowance advantage for most employees, but the abolition of partial non-resident taxation (partiële buitenlandse belastingplicht) in 2025 will result in many employees having to pay tax on their assets. For those covered by the transition rules, this change will apply starting in 2027.” – Huib van Rumpt, Partner Global Mobility Services. 

Reduction of SME profit exemption 

Small and medium-sized enterprises (SMEs) should anticipate a reduction in the SME profit exemption (MKB-winstvrijstelling) to 12.7%. This adjustment will directly reduce the tax benefit for SMEs, impacting their net income and tax liabilities. 

Adjustment of box 2 tax rate for substantial interest holders 

Another relevant development for SMEs is the adjustment of the Box 2 tax rate for substantial interest holders (aanmerkelijkbelanghouders). For income up to €67,804 annually, the lower rate of 24.5% will remain, while the second bracket’s rate will be reduced from 33% to 31% starting in 2025. 

“For substantial interest holders, it may be beneficial to postpone larger dividend distributions until 2025 when the lower rate takes effect.” – Hans Missaar, Senior Partner Tax & Legal  

Changes to tax facility for family business succession 

The Tax plan 2025 includes several changes for family businesses, in addition to previously enacted amendments to the business succession scheme (bedrijfsopvolgingsregeling, BOR) that take effect on January 1, 2025. The main proposed changes include: 

• The holding period and continuation requirements for the business succession scheme will be relaxed, reducing from 5 to 3 years. 

• The 100% exemption in the business succession scheme for business assets will be raised to €1.5 million, while the exemption for amounts above this threshold will decrease from 83% to 75%. 

• Upon gifting, the recipient of a substantial interest must be at least 21 years old. 

• The employment requirement for the Income tax deferral scheme (Doorschuifregeling, DSR) will be eliminated. 

These changes may require adjustments to succession planning strategies 

“The Tax plan 2025 formalizes previously announced changes to the Business succession scheme (BOR) and DSR. While not surprising, it is important to anticipate these changes. Depending on the situation, it may be more advantageous to make gifts in 2024 or wait until 2025.” – Hans Missaar, Senior Partner Tax & Legal.