First phase broader taxation reform: what’s on the table?

In order to allow everyone who works (and who works more) to be left with more after taxation, the following measures have been drawn up:

• Increase of the tax-free allowance from € 10,160 (fiscal year 2024) to € 13,500
• Increasing the maximum taxable income in the 45% tax bracket from € 46,440 (fiscal year 2024) to € 60,000
• Slower phasing out of the work bonus, with a corresponding adjustment of the tax credit for low net income from employment.

Furthermore, the modernisation and simplification of taxation is being pursued:

• With regard to the taxation of the family: (1) phasing out the dependant spouse allowance, (2) phasing out the system of child maintenance and alimony payments, (3) reform of the tax advantage for genuinely single parents, (4) increasing the tax reduction for childcare and (5) increasing the ceiling for children’s income so that they remain the responsibility of their parents for longer
• Reform of the system for option plans by means of a simplification and the introduction of a scheme to allow employees to participate in the employer’s equity (by means of shares or depositary receipts for shares), with tax only being applied when they are sold
• Reform of supplementary company pensions [tweedepijlerspensioen], where the 80% maximum will be abolished without affecting the current options for building a pension. Under the new system, the gross annual remuneration of the relevant year will be taken into account. A maximum of 12% of a salary can be deposited up to the salary cap ( currently about € 71,000 per year). Above this cap, there is a limit of 32% of salary
• The tax and social security rules for the treatment of benefits (of all kinds) will be brought into line with each other
• The more than a hundred federal codes in the personal income tax return will be scrapped
• Digitalization of invoices to reduce the administrative burden and the ‘VAT gap’ - the difference between the VAT expected and the VAT that is actually paid.

The burden of tax on work will be shifted to capital:

• Introduction of a minimum tax for multinational
• Changing the dividend received deduction [DBI-aftrek] into an exemption, with strict conditions in respect of participatio
• Doubling of the annual tax on the securities account (from 0.15% to 0.30%).

More support and legal certainty for businesses

• Strengthening investment deduction, where (1) an increased deduction for sustainable investments will be created, (2) a system of accelerated, double deduction and (3) the tax credit for research and development is being expanded
• More legal certainty for the exemption from payment of employee withholding tax for research and development projects (1) by means of a clear delineation of competencies between different government departments and (2) reform of the exemption scheme criteria for researchers at universities and colleges.
• Increasing the legal certainty of Advance Tax Rulings by moving the Tax Conciliation Department to a new General Administration within the Federal Public Service Finance

Finally, the burden of tax on work will also be shifted to a tax on consumption and pollution in order to encourage a sustainable and healthy society:

• Harmonisation of the VAT rates of 6% and 12% in a new rate of 9%
• Reduction of the VAT rate to 0% for vegetables and fruit, medicines, nappies and other products for intimate hygienic protection and public transport
• Retention of the 6% rate for electricity, gas, water and heating for household consumption
• Permanently lower rate for demolition and reconstruction
• Increase of excise duties on tobacco and new tobacco products
• Reduction in existing subsidies for fossil fuels.