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Source: Government of the Netherlands

News item | 19-09-2023 | 15:44

In the 2024 Budget Memorandum the government follows up on the agreements set out in the 2023 Spring Memorandum. Money has therefore been earmarked for tackling climate issues, strengthening the rule of law and raising the minimum income in the Caribbean part of the Netherlands. In addition, parents impacted by the failings in the childcare benefit system, people living in the Groningen earthquake zone, and Ukrainians – for all their differences – all remain entitled to undiminished support from the government.

‘It is appropriate, given its caretaker status, that the government show restraint,’ said Minister of Finance Sigrid Kaag. ‘We nevertheless have a responsibility to strive for a decent standard of living for all. Now and in the future. We will do what has to be done until a new government takes office. We have therefore put together a balanced package which includes measures aimed at helping the most vulnerable people in society.’
The State Secretary for Tax Affairs and the Tax Administration, Marnix van Rij, said ‘We need to collect tax in order to fund government spending. On education, infrastructure and security. We are also continuing our efforts to make the tax system simpler for members of the public, businesses and the implementing agencies.’

‘The government will continue to work on solving the problems people run up against,’ said the State Secretary for Benefits and Customs, Aukje de Vries. ‘I am pleased that, despite our caretaker status, this government is presenting a targeted package of measures to support people’s incomes. And we will continue our work to resolve the persistent problems in the benefits system and, for businesses that trade internationally, at Customs.’

Purchasing power and poverty measures

The purchasing power of people on low incomes is an issue that has the government’s close attention. Most people will experience an increase in purchasing power next year – by 1.7% for the average person in the Netherlands. But there are differences between groups in the development of purchasing power. One way to prevent this through the tax system is to increase the employment tax credit by €115. As a result, people in work who receive between the minimum wage and a modal income will keep more of the money they earn.

Families with children will also be better off. Supplementary child benefit will rise by up to €750 for the first child, by up to €883 for the second and subsequent children and by €400 for children between 12 and 17 years of age. The term ‘benefit partner’ will be redefined from 2025. This means that, for example, grandparents who move in with their children to live in an informal care situation will no longer have their benefits cut.
Social security benefits will increase fully in line with the minimum wage, because the double tax credit for social assistance benefit recipients will not be reduced in 2024. Free breakfast will again be provided at schools attended by a large proportion of children from financially vulnerable households – €165 million will be made available to fund this in the coming year. Housing benefit will be raised by up to €416. And people who cannot pay their energy bills can apply for assistance from the Temporary Emergency Fund for Energy until the end of March 2024.

Owing to these measures, the number of people living in poverty in the Netherlands will remain the same at 4.8% of the population. This is 1.3% lower than when the government took office. The number of children living in poverty will fall to 5.1%, 2.1% lower than when the government took office.

Public finances

The 2024 Budget Memorandum is the budget for next year. Expenditure in 2024 is expected to exceed €430 billion and revenue will be over €402 billion. The budget deficit is expected to be 2.9% of gross domestic product (GDP) in 2024. The national debt will be 47.3% of GDP in 2024, well below the EU threshold of 60%.

The debt level will rise in the coming years, to 52.9% in 2028. This issue will continue to command the government’s attention, since it is important for future generations that the public finances remain sound. This is also the reason why the government has fully funded the expenditure on the purchasing power package.

2024 Tax Plan

This year the Tax Plan contains necessary measures for society and the tax system, including key measures to support purchasing power and fight poverty, as well of course as the measures needed to pay for this expenditure. This extra spending will be partly funded by windfalls in 2024. 

But due to financial setbacks in other areas, it will also be necessary to raise additional tax revenue. Consequently, people on higher incomes will pay more tax, in part because the level at which the top rate of tax applies will be reached sooner. The government is also raising excise duties on alcohol, smoking tobacco and cigarettes, partly to encourage healthier lifestyles. Because of the fall in revenue from box 3 income under the current system, the capital yield tax allowance will not be indexed to inflation and the tax rate rise to 34% is being brought forward by a year. In addition, the SME profit exemption will be reduced from 14% to 12.7%. As a result, the difference in the tax treatment of employees and the self-employed will become smaller.

The government will also take measures to improve and simplify the tax system. From next year, employees can receive a higher tax-free allowance for travel costs from their employer. The existing box 3 system will be improved by treating more forms of wealth as savings.

The government will remove the financial incentive for providers of legal assistance to lodge objections on behalf of individual citizens and businesses. This includes objections to decisions on the assessed value of property under the Valuation of Immovable Property Act (WOZ) and car and motorcycle tax (BPM) returns. The government is also improving or abolishing certain tax relief schemes, including in relation to motor vehicle tax (MRB) and BPM. In addition, the government is opting to retain the business succession scheme (BOR). But it will be improved in a number of respects so that it better fulfils its purpose, namely preventing the continuity of a business from being jeopardised upon its transfer.

Business taxpayers who unintentionally make an error in a customs declaration will no longer face criminal prosecution. Instead, they will receive an administrative fine. The period over which a retrospective assessment can be imposed will change from five to three years.

Making the tax system greener is an important part of the Tax Plan. A substantial task faces us as a society regarding the climate. This means we cannot afford to stand still when it comes to the climate commitments we have made. The government will therefore take steps, where possible and effective, to phase out tax exemptions and reduced rates that apply to the use of fossil fuels.

Caribbean Netherlands 2024

The 2024 Tax Plan also includes the 2024 Tax Plan for the islands of Bonaire, St Eustatius and Saba. The plan for these islands includes measures to improve and simplify the tax system. The customary pay for director-major shareholders will be amended. An additional €32 million is being made available annually on a structural basis to improve purchasing power in the Caribbean part of the Netherlands.

Source: Government of the Netherlands

News item | 19-09-2023 | 15:27

Purchasing power and fighting poverty

The government wants to prevent people on low incomes from getting into difficulties. It is therefore making €2 billion available on a structural basis to support them. One way to achieve this through the tax system is by increasing the employment tax credit by €115. In addition the halving of the young disabled person’s tax credit will be cancelled and the phasing out of the double general tax credit for people receiving benefit under the Work and Social Assistance Act will be frozen in 2024. These measures will ensure than those receiving around the minimum income are left with more per month after tax.

The government has also decided not to fully adjust the thresholds for the top rate of income tax and the second and third income tax bands for retired persons in line with inflation but by 3.55%. Consequently, people on higher incomes will pay slightly more income tax. Nevertheless, their purchasing power will still increase next year. The €1.6 billion raised by this measure will pay for the compensation for people on lower incomes.

The government is also increasing the tax-free travel-to-work allowance from €0.21 to €0.23 per kilometre and making it easier for employers to provide public transport season tickets to their employees. The exemption for public transport season tickets and off-peak discount season tickets is therefore being made more generous and no tax will be payable if the employee uses their season ticket for business travel.

Box 3 and Pillar 2

Financial setbacks are expected in the estimated revenue from the worldwide 15% minimum corporate income tax rate on multinationals (Pillar 2) and the deferral of the introduction of the new system for box 3 from 2026 to 2027. A number of additional measures will therefore be needed in order to keep the public finances healthy and avoid burdening future generations.

One measure is to reduce the SME profit exemption from 14% to 12.7%. The exemption makes the income tax burden for self-employed business taxpayers lower than that of employees. The lowering of the exemption will narrow the gap in the income tax treatment of employees and business taxpayers. The main effect will be that business taxpayers with higher incomes will pay tax on a larger share of their profit or income. The government has also decided to raise the excise duties on cigarettes and rolling tobacco. As a result, as of 1 April 2024 the average prices of a packet of 20 cigarettes and of a 50-gram packet of rolling tobacco will be €10.70 and €24.14 respectively including VAT. Excise duties on alcohol will be index-linked on a one-off basis. Besides generating extra revenue, the government’s aim is for both measures to encourage healthy lifestyles and discourage unhealthy choices.

The deferral of the new box 3 system will result in lower tax revenue from box 3. To compensate for this, the government has decided on a one-off basis not to index-link the box 3 capital yield tax allowance in 2024. This tax allowance will remain at €57,000. Normally the allowance is adjusted annually in line with inflation. In addition, the tax rate in box 3 will be raised by an extra percentage point, from 32% to 34%, a year earlier.

Tax avoidance arrangements and tax relief schemes

In order to bring greater balance and simplicity to the tax system, the government has undertaken pursuant to its coalition agreement to tackle tax avoidance arrangements and to make tax relief schemes that have received a negative evaluation less generous or abolish them. The government accordingly intends to maintain the business succession scheme (BOR) and the deferral scheme for shareholders passing on a substantial interest in a business (DSR ab), but in amended form, since these schemes prevent the continuity of a business from being jeopardised by a gift and inheritance tax liability upon transfer. The government is adopting a total of six measures to make these schemes more robust and simpler going forward.

The special schemes relating to motor vehicle tax and the reduced VAT rate were also evaluated recently. Initial steps are now being taken under this Tax Plan to make a number of schemes less generous or to abolish them because they have been assessed as inefficient and ineffective (or not sufficiently efficient and effective). In relation to motor vehicle tax, four schemes are being abolished and two made less generous. Owners of camper vans now only pay a quarter of the tax paid by car owners. The government wants them to pay half of the latter amount in future, partly because the CO₂ emissions of camper vans are relatively higher than those of cars. It is also possible to temporarily suspend the registration of a camper van, which in practice will often mean that less motor vehicle tax will be payable. As of 2028 changes are also being made to the scheme for classic cars, as a consequence of which only vehicles built before 1988 will be eligible. For now, one of the reduced VAT rates is being abolished: the reduced VAT rate on input goods in the agricultural sector. The objective of this scheme ceased to be applicable in 2018.

Climate policy

Last spring the government announced a number of tax-related greening measures under its additional package of measures to achieve the climate goals. The climate challenges facing our society mean that we cannot afford not to make progress towards our agreed climate goals. For this reason the government wants to introduce further measures now. These measures relate to the voluntary agreement with the greenhouse horticulture sector, including the carbon tax on greenhouse horticulture as of 2025 and the abolition of the reduced energy tax rate for the greenhouse horticulture sector. The minimum carbon price for the electricity sector and for industry will rise of as of 2024, to €51.70 per tonne of CO₂. The exemptions from energy tax and coal tax for producers of iron and construction materials will also be abolished.

To accelerate the transition to zero-emission cars and to subsidise purchases of second-hand electric cars, the initial flat-rate of car and motorcycle tax payable by vehicle purchasers is being raised by €200 as of 2025.

The government wishes to encourage sustainable investment by business and is therefore making more money available for the energy investment tax credit, the environmental investment tax credit and the Research and Development (Incentives) Act.

Caribbean Netherlands 2024

The 2024 Tax Plan includes the Tax Plan for Bonaire, St Eustatius and Saba (collectively ‘BES’), under which the reforms to the BES Tax Act, the BES Income Tax Act and the BES Salaries Tax Act, initiated in 2023, are being continued. These Acts had barely been amended since the islands became public bodies within the Kingdom on 10 October 2010. For instance, the customary wage for directors-major shareholders is being adjusted. In addition, the  turnover threshold for general expenditure tax (the BES equivalent of VAT) is being increased for small businesses to $30,000 per annum. A sum of €30 million per annum is being made available on a structural basis to improve purchasing power in the Caribbean Netherlands.

Source: Government of the Netherlands

News item | 31-05-2023 | 16:23

Companies will only pay the new top-up tax if the group to which they belong pays a corporate income tax at an effective rate that is lower than the minimum tax rate. This will be determined by deducting the effective tax rate calculated for that state from the minimum tax rate of 15%. The minimum tax rate of 15% has been agreed internationally. The following simplified example shows how the primary measure works:

Less profit shifting

This bill reduces the incentive for companies to shift profits to low-tax countries. The bill is also intended to put a floor on competition between states over corporate income tax rates. This should prevent a race to the bottom in corporate tax and, in addition, level the playing field for multinationals.

‘I applaud this new step, which will result in a global approach to tackle tax avoidance,’ said Marnix van Rij, State Secretary for Tax Affairs and the Tax Administration. ‘Tackling tax avoidance is a priority for me. Because of tax avoidance, the cost of funding public services is borne entirely by individuals and companies who do pay their tax. This is unjust, especially since those companies who avoid taxes still benefit from services funded by taxation.’

Background

A global minimum level of taxation (Pillar Two) is part of the OECD agreement on the reform of the international tax system, to which 138 countries have signed up. The European Commission proposed a directive on implementing this minimum level of taxation in the EU. EU member states reached unanimous agreement on this proposal on 15 December 2022. Member States are obligated to implement the directive in their national legislation by 31  December 2023. The Netherlands has launched an online consultation on the draft implementation bill at the end of 2022. After the responses to this consultation had been processed, the bill was submitted to the Council of State for an advisory opinion.

The bill will be debated by the House of Representatives in the coming months, and then by the Dutch Senate. The bill  is expected to enter into force on 31 December 2023. The Tax Administration will strive to effectively implement the new rules into practice.

Source: Government of the Netherlands

News item | 17-05-2023 | 10:15

These conclusions can be found in the Central Government Annual Financial Report and the Central Government Annual Report, submitted to the House of Representatives on the government’s behalf by Minister of Finance Sigrid Kaag on Accountability Day.

‘The past, the future and the present all tell the same story: we need sound financial policy,’ explained the Minister of Finance, Sigrid Kaag. ‘We need solid foundations in order to transition to a green economy and take measures to protect nature and the climate, now and in the future.’

Public finances

Despite all the additional measures taken as a result of the war in Ukraine, the public finances were in better shape at the end of 2022 than a year earlier: the EMU balance showed a small surplus of €88 million, which rounds down to 0.0% of GDP.

This means that expenditure and income across the public sector are in balance. This outcome stems from a relatively high amount of money that has not yet been spent, and from lower spending on coronavirus measures. The government has not yet been able to carry out all the plans in its coalition agreement, due to the constraints faced by the public sector in terms of implementation and the current historically tight labour market. The total underspend for 2022 is €6.2 billion, up €1.4 billion on 2021. Government debt was lower than in previous years. In 2022 it stood at €480.1 billion, or 51.0% of GDP, compared with 52.1% in 2021

Management of central government finances

As in 2021, last year the management of central government finances was largely dominated by issues with substantial financial ramifications, such as the war in Ukraine, the influx of refugees, and compensation for higher energy costs. All these issues demanded a quick response. In addition, dealing with compensatory measures from previous years has also had an impact on financial management.

Nevertheless, there was improvement in financial management in 2022 compared with the two preceding years. The Court of Audit reached a more positive conclusion on regularity in 2022 than in 2021, for example. There was a marked reduction in the financial scale of the dossiers where central government did not comply with all the rules, or where its compliance could not be established with certainty: expenditure falling into this category amounted to 0.58% of the total. In 2021 that figure was 1.01%. Progress in the area of regularity is attributable to the efforts of all government ministries. What’s more, the procedures concerned with informing parliament in a timely and correct manner are far better known and are better followed.

The Court of Audit also assessed whether ministries had made errors when providing services or carrying out activities. In 2022 the Court of Audit found 44 shortcomings in operational management at seven ministries. This is a slight fall compared with 2021. However, the task of resolving shortcomings in financial management requires time and attention. Systematic improvements in financial management can only be achieved if the foundations are solid.

Wellbeing

Alongside these financial and economic results, the 2022 central government annual financial report also contains an overview of developments in the area of ‘wellbeing’. The government attaches importance to the development of wellbeing in terms of people’s current quality of life here in the Netherlands, and the degree to which this affects the quality of life of future generations and people elsewhere in the world. The government is pursuing policies aimed at enhancing wellbeing and is taking steps to integrate it into the budget system. The Netherlands Bureau for Economic Policy Analysis (CPB), Netherlands Institute for Social Research (SCP) and the Netherlands Environmental Assessment Agency (PBL) are also devoting attention to wellbeing.

The Monitor of Wellbeing & the Sustainable Development Goals (2015-2022), a survey published by Statistics Netherlands (CBS), presents a mixed picture: the general level of wellbeing in the Netherlands is high, but there is room for improvement on some themes. It is mainly indicators of ‘later wellbeing’, such as the development of natural capital, that are showing ‘red’. It is therefore vital that we achieve the ambitious objectives on climate change and the natural environment that we set in 2021 in the coalition agreement.

Moreover, wellbeing is not equally distributed across different sections of the population. A recent study by the SCP on ‘contemporary inequality’ shows that inequality not only depends on economic capital (education, income) but is also linked to social capital (‘who you know’), cultural capital (‘where you fit in’) and personal capital (‘who you are’).

Financial Management Task Force

In mid-2022 the Minister of Finance set up a task force to address the shortcomings in financial management within central government. Where possible the task force has supported government ministries, drawing attention to the issue at administrative and political level. The task force identified a need for enhanced expertise on financial management, the procedures that need to be followed and information sharing. This will again demand explicit attention in the year ahead. Ms Kaag has therefore decided that the task force will continue its work.

Source: Government of the Netherlands

News item | 21-04-2023 | 10:57

Shareholders not eligible

The compensation will be payable to holders of subordinated bonds, certain participation certificates and subordinated loans expropriated as a consequence of the nationalisation of SNS REAAL and SNS Bank on 1 February 2013. According to the judgment, holders of expropriated SNS Bank and SNS REAAL shares are not eligible for compensation. The process of paying the compensation will begin on 15 May, within the statutory time limit of four weeks after the Supreme Court’s judgment.

Statutory entitlement to compensation

The nationalisation of SNS REAAL and SNS Bank on 1 February 2013 caused the securities and assets to lose their value. In such cases the Financial Supervision Act (Wet op het financieel toezicht) requires the holders of expropriated securities and assets to be compensated. In its judgment of 21 April 2023, the Supreme Court upheld an earlier ruling by the Enterprise Division of Amsterdam Court of Appeal that holders of subordinated bonds, certain participation certificates and loans were entitled to compensation of approximately €805 million plus statutory interest. The Ministry will now proceed to pay that compensation.

Call for entitled parties to come forward

The payment process will begin within four weeks after the date of the Supreme Court’s judgment. The Ministry calls on entitled parties who are eligible for the compensation to apply for compensation through the website www.compensationsns.nl. Applications can be submitted from 15 May 2023 onwards.

Source: Government of the Netherlands

News item | 03-11-2022 | 15:35

In line with the declaration signed by the government at COP26, the intended government policy is aimed at ending new public support via the export credit insurance for the fossil energy sector abroad as of 1 January 2023. Within this intended policy, there won’t be any room for support for new projects aimed at the exploration and extraction, processing, storage, transshipment and transport of fossil fuels and electricity generation by means of fossil fuels. The elaboration of the declaration from last year’s COP26 climate conference in Glasgow is an important step in the further greening of export credit insurance.

Seizing opportunities in energy transition

Although the energy transition can be challenging for businesses with many activities in the fossil sector, this development also offers opportunities for the Dutch business community. In this way, businesses can use their knowledge for climate projects worldwide. In addition, the energy transition will require a great deal of investment in green projects in the near future. The government would like to take advantage of these opportunities and is committed to doing so. Many measures were recently introduced to better support green transactions with the export credit insurance, such as insuring higher-risk green transactions and green cover for investments in green innovations. With additional measures, the government is committed to further greening export credit insurance. For example, a start will be made on proactively setting up credit lines for foreign buyers of Dutch products, so buyers can obtain an export credit insurance-covered credit line for purchasing goods and services in the Netherlands. In addition, the aim is to have 70% of the assignments under the development collaboration infrastructure programmes carried out by Dutch businesses.

Strict conditions for exceptions

Due to the energy transition, certain investments in fossil infrastructure will continue to be necessary in the coming years to provide our energy security. The export credit insurance therefore remains accessible under certain conditions for investments in existing fossil infrastructure, provided the economic life of the infrastructure is not extended. Other examples of exceptions are fossil infrastructure support services, multi-purpose ports and electricity production in low-income countries with extreme energy poverty. Due to current geopolitical developments, the proposed policy also offers scope for projects that safeguard the security of supply in Europe and are in line with European REPowerEU policy.

Careful implementation

Because many projects have a long lead time, the government has opted to apply a transition period of one year. In this respect, applications submitted before 1 January 2023, at the latest on 31 December 2023, can lead to a policy. The Netherlands has opted for careful implementation. 

Since the signing of the COP26 declaration in Glasgow (2021), businesses and NGOs have been involved in the elaboration. At an international level, coordination has been sought about the elaboration of the COP26 declaration with co-signatories. The government wants to ensure a careful introduction of the new policy and a level playing field for businesses. In the coming period, the government will continue to consult with other countries that have signed the COP26 declaration. The elaboration is therefore intended policy that can still be revised if policy developments in other countries give cause to do so.

Source: Government of the Netherlands

News item | 12-10-2022 | 18:02

Platform
The Coalition of Finance Ministers for Climate Action, a platform established in 2019, promotes climate action by finance ministries by enabling them to share climate policy information and experiences. The Coalition focuses on areas including aligning finance ministries’ policies with the Paris Agreement commitments, setting effective pricing measures for greenhouse gases, and ensuring that climate change has a place in macroeconomic policymaking, budgetary decision-making, public investment and procurement. Attention is paid in all these activities to climate change adaptation in society and the economy, and the role of private financers.

Growing involvement
The Netherlands has been involved in the Coalition from the beginning, along with 15 other countries. More than 75 countries are now members. A large group of institutions such as the World Bank Group, IMF and the Organisation for Economic Co-operation and Development (OECD) are also affiliated with the Coalition.

Greater impact
Over the next two years, finance minister Sigrid Kaag aims to work with her co-chair, the finance minister of Indonesia, to boost the influence of the Coalition of Finance Ministers for Climate Action and involve more countries in the platform’s work.
 

For more information on the Coalition of Finance Ministers for Climate Action, visit: www.financeministersforclimate.org.

Source: Government of the Netherlands

News item | 20-09-2022 | 19:10

‘The consequences of the war in Ukraine are immense, and that includes its financial impact,’ explained State Secretary for Tax Affairs and the Tax Administration Marnix van Rij. ‘We are all seeing the rise in prices at the checkout and in our energy bills. Inflation has not been this high in decades. That’s why we’re taking substantial measures to help people on low and middle incomes. We’re also introducing structural measures to improve the tax system. Over the years, the tax burdens on several different kinds of workers – employees, the self-employed and director-major shareholders – have grown further apart. This is due to various changes affecting the three classes of taxable income (boxes 1, 2 and 3). Wealthier taxpayers benefited most from these changes. The tax system wasn’t meant to work like this and the measures in this Tax Plan will rectify the situation. And in the area of climate policy, we are taking important steps towards a greener tax system.’

Purchasing power

The government believes that it has a great responsibility to support households and businesses in this difficult period. That is why it has devised a package of purchasing-power and energy-related measures to ease the burden. The government cannot relieve all the pain, but it can help cushion the hardest blows, in part through the tax system. In its budget plans the government has set out an exceptionally large package of purchasing power measures worth €17.2 billion, of which €5 billion will be made available on a structural basis. This package includes measures aimed at supporting vulnerable groups and people on middle incomes, such as an increase in the employment tax credit to a maximum of €500 net per year and a reduction in the income tax rate in the first band. As a result of these measures, it will pay more to work.

A better balance between tax on labour and tax on wealth

Several measures are proposed that will strike a better balance between the tax burden on labour and that on wealth. They include changes to the rate of corporation tax, the accelerated phasing out of the self-employed person’s tax deduction, and the abolition of the customary-pay efficiency margin used to calculate the taxable salary of director-major shareholders. This will yield €5 billion. The aim is to reduce the disparity that has arisen in recent years between the tax burden on employees and that on business owners. In addition, the capital yield tax allowance in box 3 will be raised to €57,000. More tax will have to be paid on larger amounts and the tax rate will be increased annually, up to 34% in 2025. The tax exemption for gifts to finance the buying of a home will be lowered in 2023 and abolished as of 2024. The general rate of transfer tax will be raised from 8% to 10.4% for investors in residential property and for the purchase of commercial property.

Part of the amount generated by these increases in the tax burden will be ploughed back into structural measures that will benefit SMEs. For instance, €600 million will be set aside on a structural basis to reduce employers’ costs and make it more attractive for them to invest. The changes in box 2 in 2024 will help in this regard; there will be a lower invalidity insurance fund (AOF) contribution for small employers, and the energy investment tax credit, the environmental investment tax credit and the work-related costs scheme will be expanded. Moreover, SMEs will ultimately profit from the reduced tax burden on households, as it will increase consumers’ tightly squeezed disposable income.

Simplification

The Bill on the 2023 Tax Plan goes a long way towards simplifying the tax system. It proposes to abolish the following four schemes: the income-related combination tax credit (IACK), the averaging scheme, the pension reserve scheme (FOR), and the customary-pay scheme for startups. Measures to tackle and put an end to tax avoidance schemes will generate up to €550 million. In addition, before the summer of 2023 the government will present a plan outlining further steps to abolish or simplify tax regulations that have received a negative evaluation.

Climate policy

Climate issues and the energy transition occupy a central place in this government’s policy. Environmental taxes provide an important tool to encourage climate-friendly conduct. Because of the current high level of energy prices, an increase in tax on polluting sources of energy (natural gas) and a reduction in the tax on electricity will take effect in 2024, a year later than planned. The government is thus continuing to take long-term measures to advance sustainability. The Tax Plan also includes other long-term climate-related measures. For example, industrial enterprises will be encouraged to make extra cuts in CO₂ emissions through a reduction in their ‘dispensation rights’, which represent emissions that are exempt from the levy on CO₂ industrial emissions. In addition to the existing carbon levy, a carbon price floor will be introduced for industry as of 1 January 2023, creating a minimum price to be paid by industrial enterprises for all their emissions. Aviation tax will be raised to €26.43 as of 1 January 2023. It will also be made easier to buy solar panels by lowering the rate of VAT on their purchase to 0%. Finally, the government will be taking additional measures in the area of mobility. From 2025, car and motorcycle tax on light commercial vehicles will be levied on the basis of their CO₂ emissions instead of their list price. At the same time, the exemption for businesses will be abolished.

Box 3

The redress for taxpayers and the transitional legislation relating to box 3 set out in this Tax Plan are based on how the box 3 tax base is actually divided between savings, investments and debts and, as far as possible, on the actual earnings on this income, rather than notional allocations. This means that, from 2021, taxpayers will pay virtually no tax in box 3 on their savings (at the current low rates of interest). The arrangements for redress and the transitional legislation are therefore fairer than the old system.

In recent months the government has examined whether and, if so, how taxpayers who did not lodge objections against their tax assessments for box 3 income could be offered some form of compensation. Ways of directing any compensation primarily towards small savers were explored. However, the government has now decided not to compensate taxpayers who did not lodge objections. Full compensation would cost €4.1 billion, more than half of which would go to taxpayers with box 3 income of over €200,000. The government’s current priority is the socioeconomic security of people who are already struggling to pay their bills. It has therefore opted for a comprehensive package of purchasing power-related measures.

Source: Government of the Netherlands

News item | 16-09-2022 | 16:32

Excise Movement and Control System (EMCS)

European businesses record the movements of goods that are subject to excise duty. These goods include manufactured tobacco, alcohol and alcoholic beverages, and energy products such as oil and gas. A record is also kept of the European country in which excise duty has been remitted and where duty must still be remitted. Member states use the EMCS for this purpose, and the introduction of the 2020 Horizontal Excise Directive will expand its use.

Expanded EMCS not ready on time

The Dutch part of the EMCS must be expanded in order to comply with the new European directive. However, Dutch Customs will not be able to complete this task by 13 February 2023. Furthermore the current Dutch part of the EMCS has to be updated first before it can be expanded. There is currently insufficient IT capacity to process all the necessary changes in time. Systems of member states and businesses that are ready in time will no longer be able to exchange messages with the Dutch part of the EMCS from 13 February 2023. Both excise goods on which excise duty has been paid and those on which no excise duty has yet been paid will be affected. The aim is to have finished updating and expanding the Dutch part of the EMCS by 1 October 2023.

Interim solution

In order to minimise the impact of the delay on businesses and other member states, such as an increased administrative burden, Customs is working hard to devise an interim solution. The business community will of course be involved in working out the concrete and practical details of this solution. Dutch Customs is also in close contact with the European Commission on this matter.

Source: Government of the Netherlands

News item | 28-06-2022 | 14:17

From 2024 the entry into force of a new withholding tax on dividends will reduce these money flows even further. This was set out in a letter submitted to parliament today by the State Secretary for Tax Affairs and the Tax Administration Marnix van Rij. The letter details the effects of several measures, based on the figures provided by the Dutch central bank (DNB). These figures are provisional in nature and were calculated in part using forecasts based on past data.

‘The issue of tax avoidance via the Netherlands has been successfully tackled using a range of measures, including the introduction of a withholding tax on interest and royalties from 2021 onwards,’ said the State Secretary. ‘There has been a significant reduction in funds flowing through the Netherlands to low-tax jurisdictions. But our fight against tax avoidance is not over. There are still too many letterbox companies in the Netherlands. In the period ahead, the government wants to continue working with other countries in order to further combat abusive arrangements involving conduit companies. That’s why we’re doing all we can to ensure the success of the proposal that has been put forward by the European Commission in this regard.’

From 2021, the withholding tax on interest and royalties has enabled the Netherlands to tax payments to countries that levy too little tax or none at all. The measure applies to payments to countries with a corporate tax rate of under 9% and to countries on the EU list of non-cooperative jurisdictions. The withholding tax can also be applied in situations of tax abuse. As of 2024 the scope of the  withholding tax will be extended. As of then dividend payments will also be subject to the withholding tax. 

In addition to keeping track of financial flows to low-tax countries, the actual tax return data for the withholding tax is also being monitored. In 2021, €51 million was paid in withholding tax, while the government had not forecast any revenue. This tax revenue is due in part to the fact that companies did not adapt their structures in time. It could also be that in some cases companies preferred to pay the withholding tax than bear the high costs associated with reorganisation. The remaining flows of interest and royalties to low-tax jurisdictions (and the corresponding tax revenue) are still expected to disappear in the long run.

An assessment has also been made of whether the withholding tax in the Netherlands has shifted the money flows to other conduit countries, like Singapore and Hong Kong. Currently there is no reason to assume this is the case.

In the period ahead, the government’s approach to tackling tax avoidance will focus on additional international measures, implementing international agreements on a minimum tax rate and the European Commission’s proposal to counteract abuse of conduit companies. All of these measures will make the Netherlands even less attractive to letterbox companies. The Netherlands will continue to annually monitor developments on combating tax avoidance.