Sunday 29 November 2020

The 2021 budget main points: income tax cuts and investment

Photo: Depositphotos.com

The 2021 budget main points:

The economy

  • The economy will contract by 5% this year but will grow in 2021 by 3.5%, if there is no second lockdown
  • National debt is set to top 60% of GDP
  • Unemployment will reach 5.9% next year
  • Spending power will rise by an average of 0.8%, with people in work benefiting from a 1.2% increase
  • Increased spending on unemployment benefits will lead to a €230m overspend on the social affairs ministry budget.

Income and taxes

  • Healthcare staff will get a further bonus of €500 next year, on top of the tax-free payout of €1,000 in 2020 but no structural pay increase
  • The basic tax rate on income up to €68,507, which is currently 37.35%, will be cut to 37.10% next year and again to 37.03% by 2024
  • The planned reduction in corporation taxes for large companies will not now go ahead, but the rate for small firms is being cut from 16.5% to 15%. All companies with net profit of less than €400,000 a year will fall under the lower tax rate.
  • The tax break for the self employed will be reduced in stages of €110 to €3,240 in 2028, rather than €5,000. Next year the deduction will be €6,670
  • The tax on savings will apply to savings over €50,000, up from almost €31,000 at present, and €100,000 for couples
  • The tax on dividends will be reformed, to bring the Dutch situation in line with Europe, but will cost the government an initial €910m in payouts to foreign investors

Housing

  • First time buyers under the age of 35 will no longer have to pay a tax of 2% over the purchase price of their property – saving them some €4,000 on a home costing €200,000.
  • By contrast private investors and people buying a second home, will have to pay 8% transfer tax
  • €2bn is being spent on housing and infrastructure in an effort to speed up the supply of new homes and good public transport services
  • The tax on natural gas will rise by three cents a cubic metre
  • As announced earlier, mortgage tax relief will be cut by three percentage points to 43% and again to 40% in 2022.

Health

  • The basic health insurance package will be temporarily expanded to include treatment necessary to help some patients recuperate from coronavirus, such as extra physiotherapy
  • No increase in the own risk element in health insurance, which will remain at €385
  • Ministers expect the basic healthcare insurance premium will rise by some €37 a year
  • The maximum healthcare benefit will rise by €44 for a single person to €1,294 and by €99 for a couple

Education

  • An annual €32m is being allocated to combat the shortage of teachers
  • The education ministry budget is being increased by €450m a year because there are more students than forecast
  • €500m has been set aside to help schools pay for pupils to catch up on education missed during the lockdown

Environment

  • €5bn up to 2030 for measures to reduce nitrogen-based pollution
  • A carbon tax for industry will be introduced in 2021, beginning at €30 per tonne of CO2, and rising to €125 by 2030.
  • Deposits on small plastic bottles – 15 cents – to be introduced next July

Other

  • €800m for local authorities to offset the impact of coronavirus on local government and to pay for ‘corona-proof’ elections in March.
  • €500m has been allocated to combat coronavirus in ‘vulnerable’ countries
  • €300m for spending on prisons and secure psychiatric units to cope with an expected need for capacity
  • €150m for combating organised crime and the drugs trade
  • €150m to increase a special child benefit from low income families by €617 per child from three children upwards
  • Crown princess Amalia turns 18 next year and will be entitled to €1.6m a year to carry out royal duties

The government website government.nl has more details on the changes which will affect industry.

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