Upper House of Parliament adopts 2024 Tax Package and other tax bills

On 19 December 2023 the Upper House of Parliament adopted several legislative proposals changing Dutch tax laws, such as the 2024 Tax Package, the Minimum Tax Act 2024 and the Tax Miscellaneous Provisions Act 2024. The Upper House of Parliament also adopted several motions regarding these proposals.

During the discussions in the Upper House of Parliament it became clear that some of the last-minute changes to the Tax Plan Package which have been adopted by the Lower House of Parliament (e.g. scaling down 30% regime, dividend tax relief in case of redemption of shares for listed companies) were considered as very controversial. Dutch constitution however does not allow the Upper House of Parliament to amend legislative proposals, it can only adopt motions calling the government for action. Very remarkable in the motions is that the Upper House calls on the government to reconsider and replace some of the tax measures.

With respect to the 30% regime the government was called upon to use the results of an already commissioned evaluation to present a measure that is considered less economically detrimental. The current situation with respect to the 30% regime is as follows. In principle, the 30% regime will be scaled back as of 1 January 2024.  Such scaling back is based on a phase-out process whereby the first scaling back will only take place after 20 months. Taxpayers in scope will therefore not notice any substantive effects during 2024. This also applies to the partial foreign taxpayer status which will no longer be available for qualifying taxpayers as of 1 January 2025. Employees who already applied to the 30% regime on 31 December 2023, can still benefit from the partial foreign taxpayer status through 2026 under the transitional rules. During 2024 the parameters of the economically less detrimental 30% regime for 2025 should become clear, resulting in the presentation of potential alternatives in the so-called Spring Memorandum, followed by a final proposal on Budget Day 2024.

With respect to the tax relief for the redemption of shares for listed companies, the government was asked to present one or more measures with the same budgetary revenue. In this respect, the State Secretary of Finance promised to present options in the Spring Memorandum. He promised to also address alternative measures for increasing the tax rates in Box 2 and Box 3 and the increase in the bank tax. Which alternative measures will ultimately be included in the 2025 Tax Package depends on the political situation in the Netherlands on Budget Day and the composition of a future government.

Many of the proposals in the 2024 Tax Package were enacted as written, among others some changes in tax rates in The Income Tax Act 2001. With respect to Box 1 (income from employment and home ownership), the tax rate goes up by a minor percentage of 0.04%, the so-called Box 2 (income from substantial interest) will include a second bracket. Income derived from substantial interest (i.e. 5% or more) up to EUR 67,000 will be taxed at 24,5%, the surplus will be taxed at a rate of 33%. In addition, the tax rate for Box 3 (savings and investments) will increase from 32% up to 36%. The tax-free assets will not be adjusted and remains EUR 57,000 per person (EUR 114,000 in the case of tax partnership).

The Tax Package 2024 also includes some changes in the business succession scheme (bedrijfsopvolgingsregeling; BOR). Some of the changes are the following. Per 2024 real estate leased to third parties does not qualify for the BOR anymore. As of 2025, the exemption to transfer business assets to successors increases to EUR 1,500,000, however, the tax-free exemption will reduce to 70% instead of 83% for the amount transferred above EUR 1,500,000. Per 1 January 2026 an anti-abuse provision enters into force to prevent the "double BOR construction".

Other tax bills that passed are the implementation of a global minimum tax rate (Pillar Two directive). The Upper House of Parliament also adopted a motion in which it calls on the government to study the consequences for the fiscal investment and innovation instruments, and further which measures can help the Netherlands to stand out compared to the rest of Europe. For more information regarding Pillar Two, we refer to one of our previous articles you can find here. Another change is the tax treatment of Dutch partnerships (CV and open CV) and foreign legal forms. This bill aims to reduce hybrid mismatches. The law enters into force on 1 January 2025, and provides that all CVs will be transparent for Dutch tax purposes from then on. For more information regarding this bill, we kindly refer to one of our previous tax updates (you can find the article here), in which we discussed this bill.