Budget Day Special

The third Tuesday of September, known as Budget Day or Prinsjesdag, is when the Dutch Ministry of Finance traditionally presents the Budget, which includes the Ministry's tax plans for the upcoming year. The draft bills presented on Budget Day will be discussed by the Dutch Parliament. During this legislative process, these bills may be amended. We have outlined the main proposals below. Unless otherwise noted, these proposals are expected to come into effect on 1 January 2025.

Corporate income tax

1. Adjustments to the earnings stripping rules

The interest deduction limitation under the earnings stripping measure will be relaxed. More specifically, the maximum interest deduction above EUR 1 million will be increased from 20% to 25%. Additionally, the EUR 1 million threshold will be abolished for real estate entities that lease properties to third parties. This change aims to discourage the practice of structuring an investment into several entities to make use of the threshold per entity.

2. Changes to the debt relief corporate income tax exemption

Currently, the interaction between the exemption from debt relief corporate income tax and the tax loss carry forward rules, which was introduced on 1 January 2022, results in a tax cash-out if the debt relief income exceeds EUR 1 million. To address this issue, the debt relief corporate income tax exemption rules have been amended to ensure that any debt relief income exceeding EUR 1 million will be exempt and does not result in tax cash- out for companies in distress.

3. Changes to the liquidation loss regime

The first proposed change relates to the calculation of the amount paid (opgeofferd bedrag) by a taxpayer for its investment in its subsidiary. Under this amendment, the calculation will now include a reversed write-down of a receivable from the taxpayer without adding this amount to the revaluation reserve. This change will only apply in situations involving certain tainted transactions, such as when the subsidiary settles its debt by issuing shares to the taxpayer or when the taxpayer waives its claim. The second proposed change relates to the intermediate holding provision within the liquidation loss regime. This amendment aims to ensure that a non-deductible liquidation loss realised on an indirect subsidiary cannot be converted into a deductible liquidation loss on a direct subsidiary.

4. Clarification of global minimum tax (Pillar 2) for the subject-to-tax test

The proposed changes clarify whether the global minimum tax (Pillar 2) qualifies as an adequate tax according to Dutch standards. Specifically, the proposed amendments address the subject-to-tax test for the Dutch participation exemption. These amendments confirm in general that a tax imposed on profits encompasses a qualifying Pillar 2 surtax.

Dividend withholding tax

5. Withdrawal of the abolition of share buyback scheme

To enhance the business environment in the Netherlands, the cabinet has decided to reverse its previous decision to abolish the share buyback scheme for publicly traded companies. Hence, under conditions, it remains possible to enter into a share buyback scheme without dividend withholding tax.

6. Mandatory application of the dividend withholding tax exemption

The dividend withholding tax exemption will become mandatory for dividends paid within fiscal unities and participating interests. This change enables beneficiaries, on whose behalf dividend tax has been withheld, to file objections against the withholding.

Conditional withholding tax

7. New group concept

The term 'cooperating group' (samenwerkende groep) for the conditional withholding tax will be replaced with its own group concept 'qualifying unity' (kwalificerende eenheid). This change aims to address situations where the conditional withholding tax is levied in situations that are not targeted, for instance, in situations where there is no low-tax jurisdiction or erosion of the tax base. The concept focuses on situations where entities act jointly with the main purpose, or one of the main purposes, of avoiding the conditional withholding tax.

Income tax

8. Increase of the top bracket in Box 1

The top bracket in Box 1 (income from work and home ownership) will be increased to EUR 76,817. This change is to ensure that fewer people fall into this bracket. In addition, the bracket will be indexed annually, i.e. increased in line with inflation.

9. Reduction of the top rate in Box 2

The top rate in Box 2 (income from substantial interest) will be reduced from 33% to 31%. This change effectively reverses the increase in the top rate of tax in Box 2 from 31% to 33% as per 2024.

Wage tax

10. 30%-facility

In 2024, the 30%-facility was significantly altered . However, as per 2025, the tax-free reimbursement rate for extraterritorial expenses will decrease to 27%, rather than the initially planned reduction over time to 10%.

Real Estate Transfer Tax

11. Reduced RETT rate for residential properties

Effective January 1, 2026, the real estate transfer tax rate for real estate investors in residential properties will be reduced from 10.4% to 8%. The current rates and exemptions for individuals regarding their own home will remain unchanged.

VAT

12. Elimination of the reduced VAT rate for certain services

The reduced VAT rate of 9% currently applied to arts, culture, media, sports, and hotel stays will be abolished. Starting from January 1, 2026, these categories will be subject to the standard VAT rate of 21%. However, certain exceptions will remain in place. The reduced rate of 9% will continue to apply to specific categories, including camping sites, zoo's and cinemas.

European tax

13. Implementation of GAAR from ATAD 1

In response to pressure from the European Commission, the General Anti-Avoidance Rule (GAAR) from the Anti-Tax Avoidance Directive (ATAD 1) will be incorporated into Dutch law. This rule is designed to combat artificial tax arrangements that are primarily intended to evade taxes.

Contact

Please contact our Houthoff Tax Team if you would like to discuss the impact of any of these proposals.

You can find the various proposals here (in Dutch only).