Dutch Tax Plan 2014

A part of the new budget for the coming year is the Dutch government’s Tax Plan for 2014. The plan includes all the changes in taxation laws that will come into effect in 2014. These are still plans, however, and will need to be approved by parliament. Below are the main relevant points from the Tax Plan 2014.

Tax rates 2014

Tax rates and social security premiums will not be corrected for inflation. The tax rate for the first bracket will be 0,75 per cent lowered. The third tax bracket (42 per cent rate) will be increased from 55.991 euros to 56.531 euros.

For taxpayers 65 years and older, the tax brackets and social security premiums will also not be adjusted for inflation and the percentages will remain the same as in 2013.

However, the second tax bracket, as well as the third tax bracket, will be changed to 33.363 euros and 55.531 respectively.

Also note that the rate for Box 2 will be lower (25% - 22%) as of January 2014.

Adjustment tax credits

The general tax credit and the employment tax credit will be adjusted. The other tax credit will not be changed and will remain the same as in 2013.

› General tax credit

The general tax credit will be increased from 2.001 euros to 2.100 euros.

› Employment tax credit

The employment tax credit for 2014 will be increased from 1.723 euros to 2.097 euros. This tax credit will also be reduced for higher incomes to nil in 2017, meaning those with higher incomes will therefore pay more tax.

For 2014, the maximum tax credit for higher incomes is reduced to 367 euros (previously 550 euros).

Annuity right exemption & current severance rights

The annuity right exemption is no longer applicable from January 1, 2014. The annuity exemption can still be used up until that time.

There is a transitional arrangement for existing annuity rights. If the annuity is paid out at once instead of in installments, the payment will be without revisionary interest (a kind of penalty). It does not matter if the annuity is under your company, bank or insurance company. The payment will be taxed in Box 1.

However, for payments in 2014, only 80 per cent of the payment will be taxed.

Gift tax with regards to main residence

As of October 1, 2013, 100.000 euros may be given as gift tax-free. The condition is that the amount is used for a main residence (i.e. mortgage repayments, renovations, etc.). The extended tax-free amount is temporary and is valid until January 1, 2015.

› Earlier gifting

If you have previously made use of the old tax exemption, then this will be deducted from the 100.000 euros.

Fine for intentionally incorrect provisional tax assessment

As of 2014, a fine can be imposed for knowingly filing an incorrect provisional tax assessment.

The fine can only be imposed if the taxpayer themselves has requested a provisional refund and it must be an intentionally false application, for example, claiming the mortgage interest deduction when they do not own their own home.

Option ruling non-resident taxpayer

The current option ruling for non-resident taxpayers will be amended as of January 1, 2015.

The new ruling will apply to non-resident taxpayers who earn almost all (90 per cent or more) of their income in the Netherlands and who deserve to be treated as domestic taxpayers.

The new ruling is as follows:

› Non-resident taxpayers who are residents of the EU, the European Economic Area (EEA), Switzerland or the BES islands and who earn 90 per cent or more of their income in the Netherlands, which is subject to the levying of income or wage tax, are deemed non-resident taxpayers. They qualify for the new ruling and it is no longer the choice of the non-resident taxpayer.

› By decree, taxpayers who live in the EU, EEA, Switzerland or the BES islands but who do not earn more than 90 per cent of their income in the Netherlands, which is subject to the levying of income or wage tax, can qualify for the new ruling.

› Whether the 90 per cent requirement is fulfilled will be judged by Dutch tax standards. A non-resident taxpayer must prove his non-Dutch income by providing an income statement issued by the tax authorities of their country of residence.

› Dutch income is taxed for qualifying foreign taxpayers only, just as with other non-resident taxpayers.

› Qualifying non-resident taxpayers are entitled to the same deductions and discounts as domestic taxpayers. If the non-resident taxpayer can use the same deductions in their country of residence, they are not entitled to it in the Netherlands.

Changes to interest on tax payable

As of January 1, 2014, interest rates will be adjusted. As a transitional arrangement will apply, the changed rates will be effective as of April 1.

The interest rates will be the same as the legal interest for non-commercial transactions. However, there is a lower limit for all taxes (except corporate income tax) of 4 per cent. The lower limit for corporate income tax is 8 per cent.

Adaptation energy investment deduction

From January 1, 2014, the threshold for the Energy Investment Deduction, Environmental Investment Deduction and Voluntary depreciation for Environmental Investments will be increased to 2.500 euros.

Also, professional private housing landlords may be eligible for the Environmental Investment Deduction for the remediation of asbestos or the installation of solar panels.
 

Nico Koppel is an Expat Service Provider, who specialises in tax advice & accountancy. For more information, please comment below or visit Koppel Tax Consultants.
 

Cover photo: Minister-president Rutte on Flickr