AGREEMENT REGARDING THE DUTCH PURCHASING POWER 2023

05/09/2022

The Dutch parliament has come to an agreement regarding how to combat the current inflation on 30 August 202. The inflation has been especially impacting lower income and middle-income households in The Netherlands. The Agreement will levy more tax on capital and lower taxes on income to ensure that the Purchasing power in The Netherlands will get corrected against the high inflation of roughly 10,3 % (as of July 2022[1]).

 

According to the reporting of RTL[2] the Purchasing Power Agreement  amounts to almost 16 billion euro. This amount is a combination of incidental (one-off) expenditure and structural (long-term) expenditure. The following measures are incorporated into the Purchasing Power Agreement with regards to taxes:

• Minimum wage will increase by 10 percent as of 1 January 2023. This also applies to AOW (state pension) and welfare.
•  Lower incomes get a 1300 euro energy allowance this year (2022) and will also apply for next year. What the threshold will be to be qualified as a lower income is yet to be decided.
•  Both the rent allowance (‘huurtoeslag’) and the healthcare allowance (‘zorgtoeslag’) will go up. The healthcare allowance will go up by 412 euros next year, about 35 euros per month. The child budget (‘kindgebondenbudget’) will also go up, to help families. For the increase of the child budget 750 million euro is allocated.
• The Personal Income Tax in the first bracket will be reduced. In addition, the employment tax credit, a tax credit for working people, will be increased by 500 million euros. In this way, people with a job will benefit, so that working will become more attractive.
• The self-employed tax deduction (‘zelfstandigenaftrek’), a tax benefit for self-employed persons (‘zzp’), will be phased out more quickly. Next year, this will yield 170 million euros for the treasury.
• The Corporate Income Tax lower rate is going up from 15 % to 19%. This is expected to provide the treasury with a total of 1.5 billion euros.
• The tax on private capital will be increased. This is done by increasing the rate in box 3 of the Personal Income Tax. It is expected that this will yield 100 million euros next year (2023) and will structurally increase to 300 million euros in the coming years.
• The transfer tax on the sale of buildings (‘overdrachtsbelasting’) will be increased. This does not apply to homes, but for example to business premises. This is expected to provide the treasury with 130 million euros. Lessors of real estate must also pay more tax.
• The so-called directors-major shareholders (‘DGAs’) will also have to pay more tax. The cabinet is going to introduce a plan by the PvdA and GroenLinks to abolish the efficiency margin. This is a scheme whereby directors and major shareholders pay less tax on their income than employees with a similar salary. This is expected to yield over 540 million euros.

 

What the exact rates and amounts will be of the measures are set to be announced during Budget Day 2023 during 20 September 2022, alongside the other fiscal plans for 2023.

 

If you have any questions or inquiries regarding this topic or if you want to know how this will affect you and your business, do not hesitate to contact Nazali Amsterdam.