Tax plans for 2021
According to tradition, the third Tuesday in September, called ‘prinsjesdag’ (Little Prince’s Day), is the moment on which the national budget and tax plans for next calendar year are presented. Minister Hoekstra of the Ministry of Finance has submitted all details to the lower house of the Dutch government. The lower house just finished debating the new plans with the Cabinet.
It is important the national budget and tax plans for 2021 are finalized before the end of this year. For now, voting on the plans by the lower house is scheduled on Thursday, November 12. The upper house of the government will most likely vote on December 15.
Tax-exemption for training ex-employees too
The Cabinet wants to adjust the tax-exemption applicable to reimbursements and provisions for training, so that the exemption also applies to ex-employees. The exemption in question is applicable to expenses on specific training or education in order to find a new job – and not for preserving and improving knowledge and skills for current employment. Expenses made on the provision or reimbursement of such training and education will be exempt from taxation under specific conditions. The expenses needn’t be included in the ‘vrije ruimte’, the percentage of tax-free aggregated personnel costs.
The tax-exemption currently does not apply to ex-employees, with a few exceptions. Because the Cabinet finds training and education important – and this importance has only grown as a result of the coronavirus pandemic and its effects on the economy and labor market – the adjustment proposed by the Cabinet will make sure that expenses on the provision of training and education to ex-employees will also be exempt from taxation. This includes e.g. reimbursement for training part of a social plan as well as training budgets used only after the employment relationship has ended.
Tax-free aggregated personnel costs 2020 and 2021
By the end of April 2020, the Cabinet already announced it would increase the percentage of possible tax-free aggregated personnel costs, called ‘vrije ruimte’ in Dutch, to 3% for the first € 400,000 of an employer’s wage bill. In the Tax Plan 2021, this change has been included officially. It is a temporary change, in effect only for 2020 and should make it easier for employers to give their employees a few things extra during these difficult times.
In the Tax Plan 2021, the Cabinet also proposes to lower the percentage of tax-free aggregated personnel costs applicable to the part of the wage bill above € 400,000 from 1.2% to 1.18% as of January 1, 2021. This change will not be temporary, but is meant to make it easier to finance the tax-exempt expenses on training and education (see previous section).
New: BIK tax credit
During the discussion of the tax plans for 2021 in the lower house of the Dutch government, the Cabinet will most likely add another, new regulation to their plans: the ‘baangerelateerde investeringskorting’ (job-related investment tax credit), abbreviated as BIK. This BIK tax credit permits an organization to deduct a percentage of job-related investments from the payroll tax and national insurance premiums due.
The plan is to implement this tax credit as of 2021 for two years as ‘crisis management’. After these two years, the budgetary increase of € 2 billion will be used for a regulation similar in nature – to be determined at a later stage – with the goal to reduce employer’s costs. Currently, any details of this future regulation are yet unknown; as is the fact whether or not the BIK tax credit will be implemented. During the discussions in the lower house, the tax credit already led to a heat from the opposition.
Discount for solar-powered cars
The plans presented on prinsjesdag 2019 already included the proposals made in the Paris Climate Agreement in the ‘Wet fiscal maatregelen’ (Tax-related Measures Act). This Act has important consequences for the tax rules applying to solar-powered company cars.
Earlier, it was already announce that the discount on the taxable benefit for the use of an electric company cars would be reduced step-by-step, from 14% in 2020 to 10% in 2021, 6% in 2022, 2023, 2024, 5% in 2025, all the way to 0% from January 1, 2026. The cap, i.e. the part of the list price to which the discount applies, will be set at € 40,000 as of 2021 and will not be changed thereafter. Currently, the cap is € 45,000. This cap does not apply to the discount on zero emission cars with an engine running on hydrogen or solar power. In other words, for these cars there is no maximum discount on the amount added to an employee’s taxable wages. This means that in 2021, the discount for regular electric cars will be 10% of the list price with a maximum amount of € 4,000 and for cars running on hydrogen or solar power the discount will be 10% without a maximum amount. The taxable benefit will be 12%.
Healthcare bonus to be filed as taxable wages for final levy
Healthcare professionals and support staff who have experienced the negative impact of the coronavirus pandemic during their work directly or indirectly will receive a € 1000 net bonus from the ‘Subsidieregeling bonus zorgprofessional COVID-19’ (Bonus Healthcare Professional COVID-19 Subsidy Scheme). The scheme makes it mandatory for employers to file this bonus BEFORE it is paid to the employee as taxable wages for the final levy, called ‘eindheffingsloon’ in Dutch, as stated in the Tax Plan 2021.
Tax-free aggregated personnel costs 2020 and 2021
This means the healthcare bonuses will be charged to the percentage of tax-free aggregated personnel costs, the ‘vrije ruimte’, creating the situation in which it is (partly) taxed at 80% in the final levy. The latter is not supposed to happen, so a preventive measure is included in the subsidy scheme. The scheme will not only pay employees their healthcare bonuses, but will also cover the amount of final levy due by the employer caused by the bonuses. Applications for the subsidy scheme are possible from October 1 through October 30 to the ‘Dienst Uitvoering Subsidie aan Instellingen’.
The term ‘publieke kennisinstelling’ in the WBSO has been clarified
On the basis of the tax regulation in the ‘Wet bevordering speur- en ontwikkelingswerk’ (Promotion of Research and Development Act), abbreviated as WBSO, organizations are entitled to a payroll tax reduction, called ‘afdrachtvermindering S&O’ in Dutch, under specific conditions. So-called ‘publieke kennisinstellingen’ (publicly available knowledge institutions, such as universities or educational centers) are exempt from this tax reduction. A clarification of the term has been proposed. Now, the term ‘publieke kennisinstelling’ applies to any non-profit institution which has been fully or partially financed by the government for multiple years.
Some of these institutions are eligible for corporate tax, called ‘vennootschapsbelasting (VPB)’ in Dutch. Whether or not an institute is eligible for corporate tax is determined independently from whether or not an institute is non-profit. For clarification, it has now been determined to take away the ‘non-profit’ part in the definition of a ‘publieke kennisinstelling’.
In 2021, the following tax reduction rates will be applicable to the WBSO:
- rate for the first tax bracket: 40%;
- rate for the first tax bracket for start-ups: 50%;
- first tax bracket limit: € 350,000;
- rate second tax bracket: 16%.