On the 17 September, the Dutch government released the Budget for 2020 containing its Tax Plan along with certain amendments to Dutch tax law. Below, we include a brief explanation of some of the most important tax measures. It is the intention that most of the proposed measures will enter into force on 1 January 2020. However, it is possible that amendments will be made.
The Dutch government proposes to accelerate the introduction of the two-bracket tax system to take effect from 1 January 2020 rather than 1 January 2021. The basic rate of 37.35% (including Dutch national social security) will then apply to income up to EUR 68,507. Above this income, the top rate of 49.5% will apply. As both rates are lower than the current tax rates in the four-bracket system, it is expected that many tax payers will benefit.
The employment tax rebate and the general tax rebate will be increased. The proposal includes an increase of the general tax rebate in two steps in 2020 and again in 2021. The increase in the general tax rebate is designed to improve the net spendable income of lower income households in particular. The proposal for the increase in the employment tax rebate includes three steps.
With effect from 1 January 2020 the added taxable value related to the private use of an electric company car will increase to 8% (4% in 2019) on an electric car with a list value of EUR 45,000 maximum. If the list price of the electric car is more than EUR 45,000, the normal addition of 22% will apply on the amount above this figure.
In 2021 the added value relating to the private use of electric company cars will rise to 12% on the first EUR 40,000. If the list price exceeds EUR 40,000, the addition will be 22% on the amount above this figure.
In 2022, 2023 and 2024 the added value relating to the private use of an electric company car will be 16% on the list value up to EUR 40,000. The addition will remain 22% on the value of the car above this amount.
In 2025 the added value relating to the private use of the electric company car will be 17% of the first EUR 40,000, and 22% on the list value above this amount. Ultimately, by 2026 it is the intention that the added taxable value relating to the private use of electric company cars will amount to 22% on the full list value of the car.
In 2020, the tax deduction relating to mortgage interest will be cut by three percentage points, taking the deduction to 46%. It is proposed that the mortgage interest deductions will be further limited in future years by 3% per year to the (expected) basic rate of 37.05% in 2023.
Robin Schalekamp
robin.schalekamp@bdo.nl