(A) Taxes
Prinsjesdag 2023 is an annual event in the Netherlands marked by the King Willem–Alexander speech presenting government policies and plans for the next year. This day also includes the royal procession and is crucial for setting the political and fiscal agenda in the Netherlands. On September 19, 2023, the government presented its policy proposals for the coming year.
Do you sell beer, wine, or other alcoholic beverages? The special tax on beer, wine, and other alcoholic beverages will increase by 16.2% starting January 1, 2024.
- The price of a case of beer will increase by €0.50. That’s €0.02 per bottle.
- A bottle of wine will become more expensive by an average of €0.13.
For whom?
- Alcohol sellers
- Alcohol producers
- Alcohol importers
The SME profit exemption for small and medium-sized enterprises will be reduced in 2024. Are you self-employed or an SME entrepreneur? Are you considered a business entity for income tax purposes? You will pay more taxes in 2024 on the profits you have earned. Then, subtract 12.7% of the SME profit exemption from your income tax return. This used to be 14%.
For whom?
- Self-employed individuals and SME entrepreneurs who pay income tax and, therefore, have a legal form without legal personality (e.g., sole proprietorship, general partnership, limited partnership)
Are you entitled to the self-employed deduction? The amount you can deduct from your earnings has been decreasing each year since the law changed in 2022. In 2023, the self-employed deduction will be €5,030. In 2024, the self-employed worker’s deduction will be reduced to €3,750. You pay more taxes if the self-employed deduction decreases.
The amount of the self-employed deduction in the following years is as follows:
- 2024: 3.750€
- 2025: 2.470 €
- 2026: 1.200€
- 2027: 900€
For whom?
- Self-employed workers eligible for the self-employed deduction
What’s changing?
Are you a business entity for income tax purposes? The discount on the payment of provisional Income Tax (ib) will disappear. You will no longer receive a discount if you pay your provisional tax settlement in a lump sum (instead of in instalments) before the final payment date of the first payment period. This change is expected to take effect on January 1, 2024.
The tax-free travel allowance will increase from €0.21 to €0.23 per kilometre on January 1, 2024.
Are you self-employed? Then you can deduct this amount per kilometre from your earnings if you are a business entity for income tax purposes.
Are you an employer? You can reimburse employees’ travel expenses tax-free. This also applies to travel expenses on public transportation. And for taxi, boat, or plane expenses. As long as this is reasonable.
You can grant your employees a tax-free travel allowance exceeding €0.23 per kilometre. This additional increase is considered the employee’s salary. You can designate the additional increase as a final wage rate through the labour cost system (WKR). This way, the additional increase becomes tax-free.
The tax-free travel allowance is not for entrepreneurs who reimburse their employees for the cost of a company car or bicycle.
For whom?
- Employers reimbursing their employees’ travel expenses
- Self-employed individuals using travel expenses as a deductible expense
What’s changing?
Do you sell non-alcoholic beverages such as soft drinks and fruit juices? The consumption tax on these beverages will increase. Starting January 1, 2024, the consumption tax on these non-alcoholic beverages will increase to €26.13 per 100 litres (hectolitre).
As of January 1, 2024, mineral water and milk will no longer be included in these non-alcoholic beverages. There will be no consumption tax on mineral water and milk from that date.
For whom?
- Entrepreneurs selling non-alcoholic beverages, such as soft drinks and fruit juices
- Entrepreneurs selling mineral water and milk
What’s changing?
Are you a business entity for income tax purposes? The tax rate for Box 3 Income Tax will increase from 32% to 34% starting January 1, 2024. This is one year earlier than initially proposed. The rate in 2024 would initially be 33%. In 2025, it will remain at 34%.
The tax-free threshold for Box 3 will remain at €57,000 in 2024. For fiscal partners, it’s €114,000. The tax-free deduction would first increase (indexed) to €62,643.
For whom?
- Entrepreneurs for income tax
What’s changing?
Are you an employer? And are you hiring a foreign employee with special skills or knowledge? You can no longer reimburse the additional costs your employee incurs due to the tax-free move to the Netherlands indefinitely. Starting now, you will also need to report each year to the Tax Authorities how you want to reimburse these extraterritorial costs.
This is an adjustment to the current 30% rule. Soon, you can reimburse the costs by paying 30% of the tax-free salary. The compensation itself is included in that 30%. There is no need to specify the costs your employee has actually incurred.
Starting January 1, 2024, there will be a maximum amount for this option. You can reimburse the costs up to a maximum of 30% of the Higher Incomes in the Public and Semi-Public Sector Act (WNT) for higher salaries. This amount is determined each year.
Your employee must meet the conditions of the 30% rule. And you must register your employee with the Tax Authorities as a user of the 30% facility.
For whom?
- Employers allowing a foreign employee with special skills or knowledge to come to the Netherlands. This change is expected to take effect on January 1, 2024.
What’s changing? Do you work in childcare? Childcare can be offered in various languages. Multilingual childcare in German, English, or French will be allowed. A maximum of 50% of daily care time can be provided in a multilingual setting.
For whom?
Entrepreneurs working in childcare. This change is expected to take effect on January 1, 2024.
Your income in Box 1 is taxed in two brackets. In 2024, you will pay 36.97% income tax on your earnings up to €75,624. This is 0.04 percentage points higher than in 2023. Next year, just like in 2023, you will pay 49.5% income tax on your income over €75,624. AOW beneficiaries are subject to an adjusted first bracket.
In previous years, the bracket limits increased with the inflation rate. This year, the increase is 3.55%, which is less than the inflation rate of 9.9%. This means that you are more likely to pay the higher tax rate in the second bracket.
If you own 5% or more of a company’s shares, you have a “substantial interest.” You may receive a profit distribution or dividend. In 2023, you paid a tax rate of 26.9%. In 2024, dividends received from a substantial interest will be taxed in a two-bracket system. You will pay 24.5% income tax on earnings up to €67,000. Beyond that, the rate is 31%.
In 2024, you will pay less tax in Box 2 for-profit distributions up to approximately €106,000. You will pay more tax for larger profit distributions in 2024 than in 2023. It may be interesting to distribute saved profits from your company in 2023. Consult with your advisor. Note that after receiving a dividend, you will have private money and investments. This becomes capital in Box 3. In Box 3, there is a tax-free capital of €57,000. If the value exceeds this exemption, you will pay tax on it in Box 3. Consult with your advisor about the best course of action in your situation.
Do you have savings or investments? Then you will not pay tax on your wealth up to €57,000 in 2024. If you have more, you will pay 34% tax on the returns you have obtained. Returns refer to the yield from savings and investments. The government calculates a fixed return rate for investments at 6.04% in 2024. The return on savings is determined later. As of January 1, 2023, money in third-party accounts with a notary or bailiff also counts as savings. This also applies to owners’ participation in the assets of a homeowners’ association (VVE).
Debts are also included in Box 3. The costs of your debts are deducted from the yield of your assets. The costs of your debts are charged at a fixed interest rate. You cannot deduct a fixed amount from your debts. That is the debt threshold. The debt threshold and interest rate will be determined later.
From 2024 onwards, it will no longer be necessary to declare mutual claims and debts between fiscal partners or between parents and minor children.
Link to the Income Tax Calculation Tool for 2024
The SME profit exemption is reduced. The SME profit exemption reduces your taxable profit after business deductions. The percentage will decrease from 14% to 12.7% in 2024. Entrepreneurs with high profits will be affected the most.
Do you work at least 1,225 hours in your business? Then you are entitled to the self-employed deduction. The self-employed deduction will be reduced by €1,280 in 2024, resulting in a deduction of €3,750. In the coming years, the self-employed deduction will continue to decrease to €900 in 2027.
The tax-free travel allowance will increase from €0.21 to €0.23 per kilometre on January 1, 2024. As an entrepreneur, you can deduct this amount from your business travel expenses for using your private car, motorcycle, or bicycle. As an employer, you can also reimburse your employees at the rate of €0.23 per kilometre tax-free for business trips using their own mode of transportation, including daily commutes.
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Patricia Santa Cruz
Tax Advisor
PSM Consultancy, an online tax services in English, specializes in providing income tax and VAT services for individuals and the self-employed, in addition to making requests for subsidies in the Netherlands.
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