Dutch Tax Package 2024 amended

Last week, the Dutch Lower House of Parliament discussed the legislative proposals as presented on Budget Day. In this tax alert, we will discuss the most relevant amendments to the proposals. We refer to our Tax alert on the Tax Package 2024 for a substantiated explanation of the proposals. The plenary consideration in the Upper House of Parliament of the (amended) proposals is scheduled for 11 and 12 December next and the voting is scheduled for 19 December. It is not possible for the Upper House of Parliament to make any additional amendments.

Increase tax rate substantial interest and savings and investments
In order to cover several costs among which to increase the minimum wage, the Lower House of Parliament adopted an amendment of the Dutch personal income tax Act 2001 to increase the tax rate for substantial interest and the tax rate on savings and investments. The substantial interest rules apply (in short) to any individual who holds 5% or more of the shares of an entity. Income derived from such substantial interest (so-called box 2 income) will be taxed at a rate 33% per 1 January 2024, compared to 31% in 2023. On Budget Day, the legislator proposed an increase in tax rate on savings and investments (so-called box 3income) from 32% to 34%. The Lower House of Parliament wishes to further increase the tax rate to 36% per 1 January 2024.

Removal dividend tax facility repurchase of shares by listed companies
In the same amendment as described above, the Lower House of Parliament also voted in favor to remove the facility to repurchase shares exempt from dividend withholding tax for listed companies. In principle, dividend withholding tax is due for the repurchase of shares. The Dutch dividend withholding tax Act 1965 provides for an exemption to listed entities for dividend withholding tax when repurchasing own shares. Once this amendment has been approved by the Upper House of Parliament, repurchase of shares at a higher price than average capital paid on the shares by listed companies will be taxed at the same rate as distribution of dividends i.e. at 15%. The removal of this exemption should enter into force per 1 January 2025.

Decrease maximum amount Act on excessive borrowing private company
In the past a shareholder with a substantial interest in a Dutch company could take a loan from its company without paying personal income tax, as long as the loan could be repaid. Under new rules applicable per this year, Dutch company that directly or indirectly provides a loan receivable exceeding EUR 700,000 at the end of the tax book year to a shareholder holding a substantial interest in such creditor, will be deemed to distribute a deemed dividend in the amount of the loan exceeding EUR 700,000. Reference date for this year amount receivable is set at 31 December 2023. Since the abolition of deduction of gifts for corporate income tax does not go ahead, the Lower House of Parliament wishes to cover the costs by decreasing the maximum amount receivables for excessive loans to EUR 500,000.

Amendments30%regime
In the context of the Tax Plan 2024 the Lower House of Parliament has agreed on 27 October to last-minute changes to the 30% regime effective 1 January 2024. It has been agreed to gradually decrease the tax-free allowance from 30% to 10% during the maximum term of 5 years. This is in addition to the earlier proposal that the tax-free allowance should be capped to a salary of EUR 233,000. Existing 30% situations are out of scope. Another change is the abolition of the optional partial non-resident taxpayer regime which excludes from taxation income from substantial interest(box 2) and income from savings and investments (box 3)during the application period of the 30% regime. These types of income shall have to be reported in the income tax return as from 2024. As a transitional rule existing situations may continue to apply the non-resident taxpayer status during 2025 and 2026. It is noted that these legislative proposals shall likely be heavily debated in the Upper House of Parliament which has to approve these changes.