Budget Day 2022: main Dutch tax proposals and amendments as of 2023

On 20 September 2022, the Dutch government presented the budget for 2023. We have listed the most important items for you below, some of which, incidentally, have already been discussed in our previous alerts on the Coalition Agreement and Spring Memorandum 2022.

Tax rates

Increase in corporate income tax rate
The corporate income tax step-up rate of 15% will be increased to 19% as per 1 January 2023. Together with the plans in the Spring Memorandum to reduce the bracket limit from €395,000 to €200,000, this means that as from 1 January 2023, the first €200,000 of profits will be taxed against a 19% rate, and the excess against 25.8%.

Introduction of a two-bracket system and rate increase in Box 2 personal income tax (income from substantial shareholding)
As reported in our alert on the Spring Memorandum 2022, the government introduces a two-tier system in Box 2 (income from substantial shareholding) of the personal income tax levy as per 1 January 2024. The step-up rate will apply to income from a substantial shareholding for the first €67,000 of income and will be set at 24.5%. Any exceeding income will be taxed against a 31% top rate. As currently a flat rate of 26.9% applies, the personal income tax liability in Box 2 will substantially increase.

Increase in Box 3 personal income tax rate (savings and investments)
The government also announced gradually increasing the Box 3 rate on income from savings and investments from 31% (2022) to 34% in 2025 to improve the balance between the overall tax burden on labour vs. wealth. The tax exempt threshold will be increased from €50,650 to €57,000 as per 1 January 2023.

Increase in the general real estate transfer tax rate
In our alerts on the Coalition Agreement and the Spring Memorandum, we reported that the government intended increasing the general real estate transfer tax rate from 8% to 9%, and even to 10.1% respectively. On Budget Day, it became clear that this rate will be set at 10.4% as per 1 January 2023. Note that this rate applies to all (commercial and residential) real estate acquisitions made other than private individuals buying a main residence. The tax rate for such acquisitions will remain at 2% (in specific situations an exemption may apply).

Investments

New Box 3 regime
Following the decision of 24 December 2021, in which the Supreme Court ruled that the flat-rate Box 3 levy (effective since 2017) violated the European Convention on Human Rights, government announced the introduction of a new Box 3 regime whereby tax is levied based on an actual return rather than a notional yield. The new regime is currently supposed to enter into force on 1 January 2026. As a temporary system for the coming years, a lump-sum savings alternative is now proposed, where taxpayers are still taxed on a notional return on their (i) bank balances and (ii) other assets, and where a deduction for qualifying debts is also allowed. This alternative, although also using notional returns, is however based on calculations that should better reflect actual returns than the returns in the current legislation. Practically speaking, the return on bank balances will be substantially reduced to align with the current interest rates on bank balances.

Actualisation of the vacant possession ratio
In Box 3 specific regulations apply to the valuation of let-out properties. In principle, let-out properties are valued at their assessed WOZ value. In specific cases, the WOZ value is multiplied by the so-called ‘vacant possession ratio’, effectively reducing the net wealth for purposes of the Box 3 personal income tax calculation. Government announced updating this vacant possession ratio as per 1 January 2023. As a result, the value of a let-out property for (among others) Box 3 purposes will increase, meaning on balance a higher taxation of such assets held by private individuals.

Real estate property

Gradual abolition of the tax-free lump sum gift
Under current regulations, every individual between the ages of 18 and 40 can claim an increased gift tax exemption of up to €106,671 once per donor when a gift is made for the acquisition of that individual’s own house (the so-called ‘jubelton’). This exemption will be reduced to €28,947 as per 1 January 2023. The exemption is expected to be abolished altogether as per 1 January 2024.

Fiscal investment institutions (fiscale beleggingsinstelling)
As per 1 January 2024, a measure will be introduced which will no longer allow Dutch fiscal investment institutions (fiscale beleggingsinstellingen or FBI’s) to directly invest in real estate. This measure applies to both investments in Dutch and foreign based real estate. The legislation to such effect has not yet been published and is expected to become available next year. As from 1 January 2024, the current corporate income tax regime applicable to real estate investment funds that hold direct real estate investments, allowing for a 0% corporate income tax rate, is expected to be effectively abolished and real estate investment funds holding real estate directly will become subject to the standard corporate income tax rates of up to 25.8%. Government recognizes that this will prompt restructurings of real estate investments subject to Dutch real estate transfer tax. In view thereof, as part of the legislative proposal it will be considered to introduce real estate transfer tax exemption facilities to cater for such restructurings.

Dutch land lord levy
The Dutch land lord levy will be abolished as per 1 January 2023. This tax is levied from Dutch social housing corporations and landlords with a social housing portfolio consisting of more than 50 social private residences.

Dutch VAT rate solar panels
As per 1 January 2023, the supply and installation of solar panels will become subject to Dutch VAT at a rate of 0% instead of the currently applicable rate of 21%, but only if the solar panels are installed on or in the vicinity of private dwellings. The Dutch VAT rate of 0% will therefore not apply to solar panels installed in solar parks or on commercial real estate.

Rewards

30% facility for expats capped at WNT standard
Under the 30% facility, certain employees recruited from another country to work in the Netherlands can receive a maximum of 30% of their wages tax-free. The 2023 tax plans confirm previously announced plans to cap the 30% facility as per 1 January 2024 for expats at the so-called ‘WNT standard’ (maximum allowed income in the public service sector). In 2022 this standard is set at an income of €216,000 per annum. Transitional rules may apply.

Exception to customary wage scheme for innovative start-ups expires
As a relaxation of the main rule, the customary wage of directors and major shareholders of innovative start-ups may be set at the statutory minimum wage for a period of up to three calendar years as per 2017. The aim of this rule was to benefit innovative start-ups by improving their liquidity position. The rule, however, does not appear to be succeeding well in this respect and will therefore be abolished as per 1 January 2023. Directors and major shareholders already making use of this relaxation may continue to do so until the three-year period has expired.

Should you wish to learn more on how these or other changes in Dutch tax law may impact your business, please do not hesitate to contact us.