Small businesses and entrepreneurs will pick up the tab for a 2023 budget that aims to help the poorest in society who are struggling to make ends meet.
Boosting purchasing power is the main aim of the plan, with hand-outs worth €17.2 billion to support ‘vulnerable groups and people on middle incomes’.
This means a small drop in the first bracket of income tax (going from 37.07% this year to 36.93%), and a slight increase of this bracket, from €69,398 to €73,071. The minimum wage will rise by 10% and tax-free allowance for employees will increase slightly and benefits will go up. Energy prices will be limited for average household use and an emergency fund will ensure nobody will be disconnected for non-payment.
But the hand-outs, aimed at benefitting employees in particular, will be largely funded by richer individuals and business, particularly small and medium sized companies and entrepreneurs.
‘It is a hard budget for business,’ says a Blue Umbrella expert. ‘There are some good things. We have a recession so we have to help people who are struggling to buy food every week. But somebody has to pay.’
Box 2, a tax levied on people with more than 5% of the assets in a company, will have two brackets from next year, and the top rate of tax will rise. Dividend profit up to €67,000 will be taxed at 24.5%, and above this, the rate will rise to 31% (up from the current flat rate of 26.9%).
Various tax benefits will be scrapped, including the possibility to average taxable income over three years, save money towards your pension within your company (FOR), and the current possibility for start-ups to pay their owner-director less than the regulated minimum. A new, simpler rule to pay 96% of childcare costs for young children will be funded by scrapping a tax break for families with two working parents (IACK).
‘Several measures are proposed that will strike a better balance between the tax burden on labour and that on wealth,’ says the government. ‘The aim is to reduce the disparity that has arisen in recent years between the tax burden on employees and that on business owners.’
This means that a tax allowance for freelancers – aimed at compensating for things like a lack of holiday pay and short-term sickness cover – will be wound down more quickly, set to €5,030 in 2023 and to €900 in 2027.
Meanwhile, rules will be tightened up about the amount that director-major shareholders have to pay themselves as taxable salary – a measure aimed to generate €5 billion.
Box 3, which taxes savings and assets, will be changed to reflect actual earnings rather than ‘notional’ allocations – which were ruled illegal in a recent court case. Savings up to €57,000 will be exempt from tax, and a tax of 34% will be levied on 0.01% assumed profit for additional savings. However, tax on investments and property will be based on an assumed annual increase in value of 5.53%.
‘For big businesses, they can typically make a ruling with the Dutch tax office, but this will most affect small and medium sized businesses, like bakeries and local firms,’ says the Blue Umbrella expert. ‘They will have to cover higher salaries, higher prices and more tax. Some of them may close.
‘Some international entrepreneurs may disappear and move back to their home. There may even be more unemployment. People will have it hard. The question is: who is going to pay the bill?’
For advice about how the 2023 budget will affect you, contact Blue Umbrella
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