On October 29, 2012, the VVD and PvdA presented the result of their coalition negotiations − the Building Bridges Coalition Agreement. This agreement sets out the measures the new government intends to implement. Below, we briefly address what is currently known about the proposed tax measures. The coalition agreement does not replace the bills contained in the Tax Plan 2013, although some of the agreement’s measures have resulted in amendments or additions to the Tax Plan. Please also refer to our previous news item. Just how the majority of these measures will be realized will only become apparent at a later stage − in many cases not before next year − when the bills are introduced.
The housing market
The coalition agreement regards making the tax deduction for new mortgages conditional on an annuity repayment, and the permanent reduction in the real estate transfer tax on homes as important first steps in stimulating the housing market. The mortgage interest deduction will remain in place. However, as of 2014 the maximum percentage against which the interest can be deducted will be reduced by a half percent per annum, from the tax rate applicable in the fourth bracket to the tax rate applicable in the third bracket. Fifty percent of the revenue generated by this deduction limitation will be used to lower the top tax rate, while the other 50 percent will be used to extend the third tax bracket. Interest on any remaining debt can still be deducted in Box 1 for five years.
The rent allowance will continue in its present form so that homes remain affordable for low incomes. The new landlord charge will be increased by EUR 45 million in 2013.
Some business tax credits will be scaled back in 2015. To achieve more balance between the taxation of employees and businesses, a profit box will be introduced in 2015, which will take into account the self-employed individuals allowance, the tax-deferred retirement reserve for the self-employed, tax relief for working partners, business start-up allowances and the R&D reduction. The hours test will be canceled.
The health care benefit will be abolished in 2014 and will be replaced by an income-related health care premium. The income range for this premium extends from the minimum wage plus vacation allowance up to a threshold of twice the modal income. The 2014 budget for the health care benefit will be used to reduce the tax rates in the second and third tax brackets. The personal deduction for specific health care costs will be abolished in 2014.
The single parent credit and the supplementary single parent credit will be abolished in 2015, as will the parental leave tax credit and the personal deduction for child support. These measures are intended to reduce the number of child allowances to four: the child benefit, the child budget, the childcare allowance, and the income-related combination credit.
As of 2013, a new tax credit will be introduced in the personal income tax for individuals between 61 and 65 years with minimal employment income; this is referred to in the coalition agreement as the deferred pension bonus (doorwerkbonus). Should these individuals decide to continuing working until they are 65 and a half years, they will, on average, be able to retire one and a half years earlier without suffering any financial consequences.
The vitality savings plan that was set to take effect as of 2013 will not be implemented.
The gradual increase in the state pension age will be accelerated, whereby the state pension age will be 66 years in 2018 (was 2019) and 67 years in 2021 (was 2023).
As of 2015, a quota system for the employment of the disabled will be introduced for businesses with 25 or more employees. The quota will be increased to 5% over a six-year period. A penalty of EUR 5,000 for each vacant position reserved for a disabled person will be imposed if the quota is not met.
As of 2015, individuals with an income of EUR 100,000 or higher will no longer receive a tax credit for their retirement savings. This will apply to the second and third pillar (individual annuity accrual). As of 2015, the maximum annual accrual rate will be reduced by 0.4 percent. For the average salary pension, this means that a tax credit will only be available for annual accruals amounting to a maximum of 1.75% of the pensionable salary.
The tax credits for the research and development deduction, the innovation box and the R&D remittance reduction (S&O-afdrachtvermindering) will be scaled back by EUR 93 million in 2014; and will gradually be scaled back to an amount totaling EUR 160 million in 2015.
The coalition agreement proposes increasing the excise tax on alcohol and tobacco. The proposed increase is 14% on wine and beer, 5% on spirits, and 9 cents on a packet of cigarettes. Excise tax on diesel and LPG will increase by 3 cents and 7 cents per liter respectively. These increases will take effect on January 1, 2014, with the exception of the increase for tobacco, which will take effect on March 1, 2014.
Increased supervision by Dutch Tax and Customs Administration
The Dutch Tax and Customs Administration hopes to increase its tax revenues by intensifying its supervision. As such, the number of business audits will increase as will the audits of personal tax returns. The capacity available for tax collection will be expanded, so that more tax can be collected.
Deferral of payment for businesses
The relaxation of the policy on deferral of payment for businesses will be continued. This relaxation of policy was announced in the Tax Plan 2013 and in the amendment presented on October 5, 2012.
Other tax aspects
· Environmental considerations are the reason behind the cancellation of the motor vehicle tax exemption for classic cars (oldtimers). The fine for late payment of the motor vehicle tax will be increased to EUR 100 for a first offense and EUR 150 for subsequent late payments.
· The kilometer charge will not be introduced.
· As of 2014, the interest rate for the interest on corporate income tax due will be linked to the statutory interest rate for commercial transactions, with a lower limit of 8%. The interest rate for other taxes and late payment interest will continue to be linked to the statutory interest rate for non-commercial transactions, with a lower limit of 4%.
· The abolition of the travel allowance that was announced in the budget agreement will not be implemented. Commuting will continue to be regarded as business use for the addition to income for the private use of a company car.
· The 0.1% increase in the fixed allowance under the work-related costs rules that was announced in the Tax Plan 2013 has been withdrawn.
· As of 2014, the employed person’s tax credit will be gradually increased by EUR 125 per annum until the increase amounts to EUR 500 in 2017.
· As of April 1, 2013, the insurance premium tax will be increased to 21%.
· The VAT compensation fund for muncipalities and provinces will be abolished in 2015.
· The Netherlands will join the European initiative for stronger cooperation on a possible financial transaction tax, provided a number of conditions are met.