Netherlands: Tax proposals in coalition government’s agreement

An agreement presented 15 December 2021 sets out the new coalition government’s plans and ambitions and includes various proposed tax measures.

The coalition agreement only provides a general outline of the intended measures. The new government (the term of its office in principle ends in March 2025) will present bills to implement the agreement, and the specifics of the various tax measures only become apparent from those bills. The coalition agreement does not replace the bills in the 2022 Tax Plan package, on which the Upper House of Parliament will vote next week.

The new government will implement a controlled foreign company (CFC) measure as of 2023. If the new government adopts the CFC measure in its entirety and in its most far-reaching form, this would mean that as of 2023:

• The CFC measure would also apply to distributed profits.
• The CFC’s profit for accounting purposes would be decisive when calculating the benefit to be taken into account.
• The effective profit tax rate would be used in future.
• The exception for economic activities of substance would be amended or completely disappear.

The revenue from this is estimated at €200 million per annum.

The new government intends to implement OECD Pillar Two (the OECD/G20 initiative to introduce a global minimum profit tax rate). It is still uncertain how much revenue this would generate for the Netherlands. If it does not result in the projected revenue (€800 million), then other ways of expanding the tax base could be examined, taking into consideration the low corporate income tax rate and/or the specific range of the different corporate income tax brackets. The business climate and the position of small and medium-size enterprises (SMEs) would also be taken into account.

• €3 billion in tax cuts: Lowering tax rates would provide €3 billion in tax cuts, in particular for low and middle incomes, the employed, and families.
• Phasing out of self-employed persons deduction: As of 2023, the self-employed persons deduction (zelfstandigenaftrek) would be further reduced in phases of €650 (including the baseline, in the last two years, in phases of €605) to €1,200 in 2030. During the new government’s term of office, the self‑employed would be compensated via an increase in the labor tax credit.
• Average salary plan to be repealed: As of 2023 the average salary plan for personal income tax purposes would be repealed.
• Untaxed travel allowance to be increased: As of 1 January 2024, the untaxed travel allowance would be increased. The exact rate increase still has to be worked out.
• Bill on excessive borrowing: The bill on excessive borrowing would be amended, with the threshold being increased to €700,000 (from €500,000).
• Introduction of actual return on investment in Box 3 and taxing of tenanted property: As of 2025, a new Box 3 regime based on the actual return on investment would be introduced. In anticipation of this, the value with vacant possession ratio would be repealed as of 2023, which means that the tax on the return from tenanted property in Box 3 would be more in line with the actual situation. The revenue from this, together with an additional budget of €200 million, would be used to increase the exemption in Box 3 to approximately €80,000. Under the new Box 3 regime (thus as of 2025), savings and investment would be directly taxed at the actual return realized. The change in value of property would initially still be taxed at a fixed rate, with the transition to an actual return following as soon as possible.

• Business succession tax relief: Business succession tax relief for inheritance tax and gift tax purposes and for personal income tax purposes is important for the continuity of businesses, in particular family businesses. During the new government’s term of office, the business succession tax relief would be examined to see how it can be improved and how improper use of the scheme can be addressed, so that it is used as intended—this would take place together with the evaluation of the business succession scheme (bedrijfsopvolgingsregeling; BOR) which is set be completed in 2022.
• Gift exemption for taxpayer’s home: As of 2024, the gift exemption for the taxpayer’s own home—also referred to as the tax-free lump sum (jubelton)—would be repealed.

Numerous changes are in the pipeline for climate and environmental taxes. Some of these measures are listed below.

• The current CO2 tax on industrial emissions would be tightened “in the margins.” This would be accomplished via changes to the number of dispensation rights and the rate.
• As of 1 January 2023, a minimum CO2 price for industry would be introduced.
• The energy tax rate structure would be made less degressive by increasing the rates in the higher consumption brackets for gas and electricity.
• The ODE rates (surcharges for sustainable energy) in the second and third electricity brackets would be reduced as of 2023 (compared to the rates in the ODE baseline).
• The energy tax rate for gas in the first bracket would be increased by 5.23 cents/m3 during the period 2023-2028.
• The energy tax rate for electricity in the first bracket would be increased by 5.23 cents/kWh during the period 2023-2028.
• The reduced energy tax rate for greenhouse horticulture companies would be repealed as of 1 January 2025.
• In 2030 an MRB Plus (kilometer charge) would be introduced with a flat kilometer rate for all passenger cars and delivery vans.
• The air passenger tax would be increased as of 2023.
• As of 1 January 2025, the budget for the environmental investment allowance (milieu-investeringsaftrek) would be permanently increased by €30 million.

• Real estate transfer tax: The real estate transfer tax on non-residential property and on the purchase of homes by legal entities and individuals who will not be living in the home in the long-term, would be increased to 9% (from 8%). This measure is to be introduced as of 2023.
• Landlord levy: The landlord levy would be abolished as of 2023.
• Consumption tax on alcohol-free drinks: As of 2023, the consumption tax on alcohol-free drinks would be increased (mineral water may be exempted as of 2024).
• Excise tax on cigarettes and tobacco: The excise tax on cigarettes and tobacco would increase to approximately €10 per packet, in two steps, as proposed in the National Prevention Agreement (Nationaal Preventieakkoord).
• Leading role in the European Union: The Netherlands will commit to a digital services tax—although there are signs that the EU is abandoning a digital services tax—an air passenger tax, a CO2 border tax, and a minimum profit tax rate to prevent unfair competition between EU Member States. The Netherlands will also work together to tackle tax evasion.

Read a December 2021 report prepared by the KPMG member firm in the Netherlands