On 15 September 2020, the Dutch government published the budget proposals for fiscal year 2021. The proposals are currently subject to the review and discussions by the Dutch Parliament and as such may be subject to amendments. The final version of the proposals is expected to be enacted in December 2020.

Corporate tax measures

• The previously announced reduction of the high corporation tax rate will be scrapped; the rate will remain at 25%. The funds freed up will be used to strengthen the economy.
• The reduction of the low corporation tax rate from 16.5% to 15% will go ahead as planned. Moreover, more SMEs will pay this lower rate in the years ahead. From 2021 this rate will apply to profits of up to €245,000. In 2022 the amount will be raised further to €395,000.
• A new investment tax credit will be introduced in 2021 to encourage businesses to invest. Businesses that make an investment, such as the purchase of a new machine or commercial vehicle, will pay less salaries tax and national insurance contributions. This will give the economy an extra boost.
• The self-employed person’s tax allowance will be further reduced, but this will be compensated by the increase in the employment tax credit and the decrease in the basic rate of income tax from 37.35% to 37.10%. This will reduce the differences in the tax burden on employees and self-employed people. From next year, the allowance will be reduced by an extra €110 a year, until it reaches €3,240 in 2036.
• Multinationals will bear a fairer share of the tax burden, but the business climate will be taken into account. For instance, the offsetting of losses will be limited from 2021, and tax authority will explore how to ensure more equal tax treatment of equity and debt.

Individual tax measures

• In 2021 the rate in the ‘new’ first tax bracket, which includes the vast majority of people, will be reduced by 0.25 percentage points to 37.1%. The top rate will remain at 49.5%.
• In addition, employees will pay less tax because the employment tax credit will be increased by up to €324 to a maximum of €4,205 (including indexation).
• To provide extra support to people on low incomes, the general tax credit will be raised by €82 to a maximum of €2,837 (including indexation).
• The government is increasing the elderly person’s tax credit by €55 to a maximum of €1,703 (including indexation).
• The child budget for families with three or more children is being increased. From the third child, the amount per child will rise by €617 to €919.
• In 2021 the reduction of the self-employed person’s tax allowance will be accelerated. The allowance will decrease by €360 to €6,670. But self-employed people will not be worse off because, like employees, they will benefit from other tax cuts.
• The tax allowance for savings and investments (box 3) is being raised from €31,000 to €50,000 per person.
• Tax relief for deductible items (such as mortgage interest ) will be reduced from 46.0% to 43.0%.