The Dutch Second Chamber of Parliament recently approved 17 amendments to the country's tax system.
Among the changes made on October 26, 2023, the Minimum Profit Tax Act 2024, the Tax Miscellaneous Provisions Act 2024, and the 2024 Tax Plan package are the amendments that will have the most noticeable impact on businesses and expats. Throughout this piece, we explore how these changes will impact contractors, foreign contractors and organisations who employ contractors.
Changes for Director Majority Shareholders (DGAs) and Private limited companies
The 2023 system will see the income tax rate of box two split into two brackets:
Those who earn up to €67,000
Those who earn more than €67,000
The second bracket's tax rate has increased from 31% to 33%, whilst the first bracket remains unchanged at 24.5%. In addition, the aforementioned tax rates are also applicable to the reserves mentioned in the book value.
Changes for Income Tax for entrepreneurs
It was initially suggested that the exemption for SME profit would be reduced from 14% to 12.7%. However, the exemption was only lowered to 13.31%, which was criticised for not accounting for the significant tax increases in other areas.
Changes in income tax for employees
In an effort to utilise specific tax policies to achieve desired outcomes to reach a balance between additional spending and revenue and to support climate goals, the government has decided to implement targeted tax measures. As a part of this, the rate for Box 3 has been increased from the previously announced rate of 34% to 36% for 2024 and beyond. However, the government has also decided to reduce green investments under Box 3 from 2025.
Amendments to the Business Succession Scheme (BOR)
The 2024 plan will see an increase of €300,000 for the 100% exemption for the Business Succession Scheme (BOR) from €1.2 million to €1.5 million. One important thing to note is that assets exceeding the new limit will only receive a 70% exemption, down from 83%. However, it's worth mentioning that this rate is expected to be revised to somewhat below 75% starting in 2025.
Tax Break for Freelancers (ZZP’ers)
A change that will significantly impact freelancers is reducing the self-employed tax exemption. This specialised tax-free allowance will be reduced by just over 25% from € 5,030 to €3,750. This allowance is further set to decrease to €900 in 2027.
In a recent post on our website, we discussed the latest reductions to the 30% ruling and how it will impact foreign contractors. Please read more about this here.
Increase in the Minimum Wage
The minimum wage in the Netherlands is set to increase for the over-20s age group. This change will increase the hourly rate for all adults by 3.75% to €13.27 per hour. Prior to these changes, there was a minor deviation depending on the number of hours worked.
Increase in Pension Age and Social Security Benefits
The pension in the Netherlands has increased to 67 from the previous 66 years and ten months. In addition, the state pension, all Social Security, and child benefits will increase in line with inflation.
Travel Expenses for Employed Contractors
The untaxed travel expenses limit will increase from 21 cents per kilometre to 23 cents. Additionally, organisations can grant employees a public transport card without being viewed as a taxable benefit.
If you are a contractor working in the Netherlands or are interested in becoming an international contractor, don't hesitate to contact our team. Our team at 3C Global provide a range of tailored contracting services to help contract professionals with administrative, tax and compliance-related tasks, thus ensuring that you can concentrate on your role and know that your contract's legal, financial and compliance-related aspects are looked after.
Get in touch with us today for your international contracting needs!