Prinsjesdag, the annual presentation of the Dutch government’s budget, unveiled several proposed tax changes that could significantly impact foreign entrepreneurs doing business or considering doing business in the Netherlands. This article provides a comprehensive overview of the key changes announced on Prinsjesdag 2024, focusing on their implications for foreign businesses.
Business taxation
- Open CVs Become Fiscally Transparent: The Open Commanditaire Vennootschap (CV), similar to a limited partnership, will now be treated as fiscally transparent. This simplifies tax administration for foreign investors using this structure, as profits and losses are directly attributed to partners.
- Giftenaftrek Abolished: The tax deduction for charitable donations will be abolished for corporations from January 1st, 2025. This affects foreign businesses with philanthropic activities in the Netherlands. However, sponsoring and advertising expenses for social causes remain deductible.
- Earnings Stripping Rules Amended: The rules will be relaxed, increasing the maximum deductible interest expense from 20% to 25% of the adjusted taxable profit, or €1 million (whichever is higher). However, real estate companies will face a stricter rule, with their adjusted taxable profit deemed zero, eliminating the interest deduction for them.
- Liquidation Loss Rules Tightened: The “tussenhoudsterbepaling”, preventing conversion of non-deductible capital losses into deductible liquidation losses, will be broadened. This aims to prevent tax avoidance through intermediate holding companies.
| Profit | 2024 | 2025 |
|---|---|---|
| SME tariff | 19% (up to €200.000) | 19% (up to €200.000) |
| Standard tariff | 25,8% (profits exceeding €200.000) | 25,8% (profits exceeding €200.000) |
| Innovation Box | 9% on profits derived from qualifying innovative activities | 9% on profits derived from qualifying innovative activities |
Personal Income Tax (IB)
- Tax Rate and Bracket Adjustments: The lowest tax bracket rate decreases from 36.97% to 35.82%, while the second bracket rate increases from 36.97% to 37.48%. The thresholds for these brackets are also adjusted. This results in a slight tax increase for some sole proprietors and freelancers.
- 30% Ruling Gradually Phased Out: This ruling, beneficial for attracting skilled foreign workers, will be phased out but much less than previously thought. From 2027, the tax-free allowance reduces to 27%, and the eligibility criteria become stricter with a higher salary threshold.
- Partial Non-Resident Taxpayer Status Abolished: Foreign workers can no longer opt for partial non-resident taxpayer status for Box 2 (substantial holdings) and Box 3 (savings and investments). They will be taxed on their worldwide income in these categories.
- Lower Box 2 Tax Rate: The highest Box 2 tax rate on income from substantial holdings (e.g., dividends) will be reduced from 33% to 31%, making the Netherlands more attractive for foreign investors holding significant stakes in Dutch companies.
| Personal Income Tax (IB) | 2023 | 2024 |
|---|---|---|
| Bracket 1 | 36,93% up to €73.031 | 36,97% up to €75.518 |
| Bracket 2 | 49,50% from €73.031 | 49,50% from €75.518 |
| Box 2: Substantial Interest | 2022 | 2023 | 2024 |
|---|---|---|---|
| Up to €67.000 | 26,9 % | 26,9 % | 24,5 % |
| Over €67.000 | 26,9 % | 26,9 % | 33 % |
Value Added Tax (BTW)
- Revised VAT Treatment of Real Estate Services: A 5-year review period is introduced for services related to real estate. The deductible VAT will be adjusted based on the actual use of the property, potentially impacting foreign businesses with real estate investments in the Netherlands.
- Standard VAT Rate for Accommodation and Cultural Services: The reduced 9% VAT rate for accommodation and certain cultural services will be replaced with the standard 21% rate, impacting the tourism and cultural sectors.
- Expanded Small Business Scheme (KOR): The KOR, exempting small businesses from VAT obligations, expands its scope. The annual turnover threshold for eligibility increases to €100,000, and EU businesses operating in the Netherlands become eligible.
Transfer Tax (Overdrachtsbelasting)
- Reduced Transfer Tax for Second Homes: The rate for purchasing a second home drops from 10.8% to 8%, potentially attracting foreign investment in the Dutch real estate market.
Energy and Emission Taxes
- Hydrogen Tax: A separate tax will be introduced for hydrogen, aligned with the electricity tax rate in the fifth tax bracket.
- Coal Tax: Exemptions for dual and non-energy use of coal will be abolished.
- Greenhouse Horticulture Tax: A tax will be levied on CO2 emissions from the greenhouse horticulture sector.
Other Relevant Changes
- Business Succession Rules Tightened: The “Bedrijfsopvolgingsregeling” (BOR) and the “Doorschuifregeling Aanmerkelijk Belang” (DSR ab) are being restricted to prevent misuse. From 2026, only regular shares with a minimum 5% stake will qualify for these tax benefits, and anti-abuse measures like preventing “rollator investments” are being implemented.
- Simplified Car Classification: The fiscal classification of vehicles will align with the registration in the national vehicle registration system, simplifying tax administration.
Implications for Foreign Entrepreneurs
The proposed tax changes have several implications for foreign entrepreneurs:
- Increased Complexity: Some changes, such as the revised VAT treatment of real estate services and the new earnings stripping rules for real estate companies, may increase the complexity of tax compliance for foreign businesses.
- Tax Benefits: A very limited reduction of the 30% ruling and the abolition of the Giftenaftrek reduce the tax benefits available to foreign businesses and workers.
- Opportunities for Investment: The reduced transfer tax rate for second homes may create investment opportunities in the Dutch real estate market.
- Sustainability Focus: The introduction of a hydrogen tax and the greenhouse horticulture tax reflect the Dutch government’s focus on promoting sustainability.
The proposed tax changes announced on Prinsjesdag 2024 have a mixed impact on foreign entrepreneurs. While some changes simplify tax administration and create investment opportunities, others increase complexity and reduce tax benefits. Foreign businesses operating or planning to operate in the Netherlands should carefully analyze these changes to understand their potential impact and adjust their strategies accordingly.
