Budget Day Special 2019 complete
Many of the measures included in the Tax Plan 2020 had already leaked out to a greater or lesser extent or had already been announced by the Cabinet. That being the case, the Tax Plan contains the measures deemed necessary in the Fiscal Policy Agenda 2019. The Budget Memorandum states that the Cabinet is advocating a substantial reduction in tax and social insurance contributions paid by private individuals, part of which will need to be covered by the business sector.
Having read the documentation, we have inferred that the Cabinet is definitely adopting a less friendly approach towards entrepreneurs and business owners. On the one hand, this is apparent due to the inclusion of measures intended to combat tax avoidance on the part of multinationals. A good example of this is the announcement of adjustments to the liquidation loss scheme and the discontinuation loss scheme. A further example is the introduction of taxation at source on interest and royalty payments to low-tax jurisdictions and in cases constituting an abuse of the tax system. These proposals come on top of recently published draft laws, such as The Mandatory Disclosure Directive and the Anti Tax Avoidance Directive 2 (ATAD 2),which is a legislative proposal to prevent companies operating internationally from taking advantage of the differences between the corporate income tax systems of individual countries. These final two draft bills do not form part of the package of legislation envisaged in the Tax Plan 2020, but will follow the same legislative process schedule as the Tax Plan 2020. In view of the fact that the approach towards tax avoidance and tax evasion is one of the policy priorities of the current Cabinet, it is clear where these draft bills have originated.
On the other hand, the Tax Plan also includes measures that will affect SMEs. One of the most striking of these is the reduction in the tax allowance for self-employed persons. What is more, and contrary to previous announcements, the high rate of corporate income tax is not going to be reduced in 2020. From 2021 onwards, that high rate will be reduced however, to 21.7%. However, this reduction is lower than was announced in the Business Sector Act (Wet bedrijfsleven) 2019. Originally, it was intended that the high rate would be reduced to 20.5%. The good news for SMEs is that the planned reduction in the low rate of corporate income tax has not been changed. With effect from 1 January 2021 onwards, that rate will change to 15%.
The increase in tax and social contributions payable by the business sector will be of benefit to private individuals. The Tax Plan 2020 contains a variety of measures to reduce income tax and to make working (or working more) a more financially rewarding activity. One of the measures is the accelerated introduction of the dual-band system (from four to two tax rate brackets). This is to be implemented in 2020, instead of in 2021. The employed person’s tax credit and the general tax credit will also be increased further.
The Cabinet is also taking further steps to promote a greener and more sustainable economy, including by means of the Climate Agreement Tax Measures Act.
Below, we have set out the most important topics for you and have provided our comment about each one. If you have any questions or require any additional information, please contact your usual adviser at PKF Wallast.
Jeroen van Strien
Head of Professional Tax Practice at PKF Wallast