The alternative tax Halloween. You think you had a good night last night (October 31), we Dutch tax advisors had a more frightening night: October 26 last.
The alternative tax Halloween
The alternative tax Halloween took place October 26 in our Parliament at night, after dinner. I can only assume a lot of alcohol was consumed, as this was the last day before the election period. That implied the parliament with its parties as it was October 26 was the last day. From October 27 onwards no more Parliament meetings due to the November 22 elections. Just before this period, after dinner around midnight the 2024 tax plan was discussed.
Tax plan 2024
Our experience with the knowledge in Parliament about the tax rules Parliament introduced is a low level experience. Basically not much is understood, what is understood is the money coming in. Especially how that can be spend on the Political agenda. The future consequences of the tax rules introduced are not taken into account, simply as it is not understood.
The 30% ruling was one day a 35% ruling for a 12 year period. Then it changed to 30% for 12 year period, then 10 year period, then 8 year period, now 5 year period. Currently (2023) 70% of your salary is taxed and 30% is tax free. Parliament finds this unfair for the non-qualifying workers, hence they voted against the 30% ruling.
The origin of this ruling is found in attracting knowledge from abroad. Experienced and educated employees working at ASML, Booking, Shell, the University, the bank or in your company. These employees have left their home country. Hence more travel costs to visit family, double housing costs, time and costs to find a place in the Netherlands. Costs to learn the language. And many more costs equaling roughly the 30% of the salary not being taxed. The origin is unknown to our Parliament.
30% ruling – 2024 onwards
Suggested during the alternative tax Halloween, and undoubtedly accepted, the 30% ruling becomes no longer a 60 month 30% ruling. It becomes a 20 month 30% ruling, a 20 month 20% ruling and a 20 month 10% ruling. For those holding already the 30% ruling on December 31, 2023 a special arrangement will be made. What that will contain, no idea yet. But it is only November, plenty of time to plan your life till December.
30% ruling – Box 2 and Box 3
Part of the fun of the 30% ruling is that none of your worldwide assets are exposed, nor did you need to report any of the Box 2 income. Box 2 is the result of your participation of at least 5% in a company. As per 2026 our Parliament has voted this no longer to be applicable.
Box 3 increased tax rate
Parliament also increased the already increased Box 3 tax rate. Currently 32%, suggested was to increase that to 34%, but to balance the expenditure that makes the Parliament look good in elections the rate is increased to 36%.
BV excessive loan limitation
Maybe not part of your taxation, but if you own a limited liability company (BV, Ltd, GmbH, Srl) while living in the Netherlands, Dutch rules apply. Sometimes the owner shareholder uses money from the BV to make investments for future pension plan. Investments such as property, or share portfolio. A loan with interest payments and repayment schedule is taken out.
As per 2024 was introduced that this should be maxed at EUR 700.000. Any amount exceeding is treated as dividend, and dividend tax is levied. In the alternative tax Halloween fright night that amount has been reduced to EUR 500.000. Imagine that in our trade this involved long term planning, simply a significant reduction is introduced.
In line with this, the dividend tax rate has been increased. The plan was to increase the corporate tax from 25,1% to 36,4%, but Parliament did understand this would scare all companies.
Tax is exciting
We think tax is exciting. Nothing exciting about these new tax rules, especially when the above is unnecessary. We have enough rules. If the rules we have would be checked more often, enough money for the political plans would roll in. The checking does not need to involve human beings, we have plenty of system checks that can create a notification that should make those applicable act. Most checks are currently not being used.
What is done now with the 30% ruling creates a knowledge drain. The Box 3 increased rate will make investors sell their property to non-investment buyers. That implies rental places will disappear from the market. Not everybody can or wants to purchase a house. And should one day the corporate tax rate be increased to 36,4% there will be an exodus of companies.