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What the government’s 2021 spending plans mean for your taxes


Last month, the Dutch government announced a set of measures aimed at creating ‘a better, fairer and greener tax system’, and many of the changes will make a difference especially to those at the lower end of the income scale.

‘This was an important budget for various reasons,’ said a spokesperson from tax and benefits expert Blue Umbrella. ‘The government wants to stimulate the economy again, keep people in work or at least retraining for their future career, and make it easier for people starting out – whose chances could have been most affected by the economic slowdown this year.’

There are all kinds of measures for different groups, from those in normal employment or wanting to buy their first home to people reaching the retirement age. Blue Umbrella’s team of experts has broken down the most important new regulations for an international audience.

Saving graces

A huge number of people will benefit from a reduction in wealth tax from 2021. The Dutch government says that almost a million more people who have savings and investments will not have to pay tax on them any more in the ‘box 3’ section of their tax returns.

The first €50.000 of your savings or small investments will not be taxed at all, and everyone with savings of up to €220.000 will pay less tax on them.

Home goal

The government will also make it easier for people to make their first investment in a home. If you are between the ages of 18 and 35 and going to buy a first home, then you will not have to pay property transfer taxes at all. If you are 35 or older then you will have to pay a 2% property transfer tax, while the rate for investors will rise to 8% – a positive change for starters, which could increase their chances of finding an affordable house.

If you are renting a house in the Netherlands and you have a lower income, the housing corporation will take this into account from 2021 to ensure you are paying a rent that is considered suitable. If you, as a tenant, are paying a high rent based on your income, then you can also apply for a one-time only rent reduction.

Work it

The basic income tax rate will drop from 37.35% to 37.1% next year, and you will benefit most if your yearly income is up to €68,507. Employees and self-employed people will benefit from a drop in the income-related combination tax credit compensated by a higher labour levy rebate.

However, self-employed people will get a slightly lower tax credit, falling from €7,030 this year to €6,670 next year, as part of a broader plan to encourage businesses to employ more staff.

But corporates have better news: in 2021, the basic rate of corporate tax will be lowered from 16.5% to 15%. This basic tax bracket will be increased for profits of up to €245,000 (rather than the current €200,000). In 2022, the basic tax bracket will be increased again to a profit ceiling of €395,000.

Meanwhile, training for employees will be more accessible. After their employment ends, an employee will be able to follow a retraining course at the employers’ expense, and without paying income tax on the costs.

Golden age

Finally, people who have reached the retirement age and have a yearly income
of not more than €49,000 will also benefit from a higher ‘elderly’ tax discount.

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