On Budget Day 2022, the financial plans for the coming year were officially announced. Mazars has listed the most important (tax) proposals of the 2023 tax package. What will change for you?
The 2023 tax plan contains some important changes/measures for private clients. However, there is no fundamental system change. A division has been made between the general measures that apply to a large group of private individuals, measures relating to the revision of the so-called box 3 taxation, and measures concerning gifts and the transfer tax.
Reduction of the first bracket tax rate in the Income Tax
The government plans to reduce the tax rate on income earned through labor (box 1) in the first bracket (up and till €73.073) from 37.07% to 36.93% in 2023.
Repeal of the averaging scheme
It is proposed to repeal the averaging scheme in the Income Tax Act of 2001 from the 1st of January 2023. This means that 2022 - 2024 will be the last period over which the arrangement is possible.
Repeal of income-related combination discount
The government proposes to repeal the income-related combination credit (IACK) from the 1st of January 2025. This does not apply to parents with one or more children born before 1 January 2025. They will continue to receive the IACK until the (youngest) child is 12 years old. To continue to encourage parents to combine work and childcare, the childcare allowance will be adjusted.
Phasing out fiscal old-age reserve
It is proposed to phase out the fiscal old-age reserve (FOR), which can be used by entrepreneurs subject to income tax. This will be achieved by introducing the measure that with have effect from the 1st of January 2023. It will no longer be possible to build up the old-age reserve. The retirement reserve built up until 31 December 2022 can be settled under the current rules.
Reduce self-employment deduction / increasing labour tax credit / general tax credit dependent on aggregate income
By decreasing the self-employed deduction, the government aims to reduce the difference in tax treatment between employees and the self-employed. The approach is to reduce the self-employed deduction in several steps from €6,310 in 2022 to €900 in 2027, starting in 2023. At the same time, the employment tax credit, which applies to all employed people ( not only entrepreneurs), will be increased. Finally, the general tax credit will become dependent on aggregate income, this means that not only box 1 income will be taken into account, but also box 2 and 3 income.
Adjustment of the donationsl multiplier for partners
As of the 1st of January 2012, the Income Tax includes a multiplier for the deduction of donations (both periodic and other donations) to cultural ANBIs (public benefit institution). Donations to a cultural ANBI may be multiplied by 1.25 for the income tax deduction, with a maximum increase of €1,250. It has recently come to light that the multiplier for donations to cultural ANBIs is incorrectly applied to tax partners. Indeed, tax partners could/should have been granted a joint maximum amount of €2,500. The Second Chamber (The House of Representatives) will soon be informed about how the Tax Authorities will apply the multiplier for the tax years from 2017 to 2022.
It is proposed to align the law with current practice from 1 January 2023. This means that for the application of the multiplier, the cultural gifts of tax partners will be aggregated and this amount will then be increased by 25%, but at most by €1,250.
Limiting periodic gift deduction
The government proposes to introduce a ceiling for periodic gifts at €250,000 per household. This will ensure that it is no longer possible to fully offset exceptionally high incomes with a very high periodic gift.
Legislative proposal on excessive borrowing from own company
Separate from the 2023 tax plan package, the bill on excessive borrowing from one's own company was recently adopted by The House of Representatives. Based on this bill, director-principal shareholders (DGA’s) who borrow more than €700,000 from their own limited company will have to pay box 2 income tax on the excess (26.9% and, in 2024, 24.5% up to a box 2 income of €67,000 and 31% for income above that). The proposal lies before The Senate (1st Chamber) for review. Our expectation is that the proposal will be approved. It is therefore important for DGA’s with a high debt to their own limited company to be aware of this.
Measures relating to box 3
Box 3 rate
The government proposes to increase the current rate in box 3 (31%) by 1 percentage point per year to 34% in 2025 and to increase the tax-free capital from €50,650 to €57,000 with effect from 1 January 2023. For partners, this will increase the tax-free capital from €101,300 to €114,000.
Box 3 legal restoration / transitional legislation
From 2026, there will be a new regime for box 3 in which the actual return on assets will be taxed. For the intervening years (2023 to 2025), the government will be working with transitional legislation. This temporary legislation is based on the actual distribution of savings, investments and debts. In doing so, the tax authorities use rates of return that are close to the 'real' rates for savings, investments or loans. The transitional legislation applies to everyone. The box 3 restoration for the calendar years 2017 until 2020 has already started as of 1 July 2022 under the Box 3 restoration of rights decree. The legislative proposal announced by the government for the Box 3 Legal Restoration Act is the statutory translation of the Policy Decision. On balance, there will only be a fundamental adjustment of box 3 from 2026 onwards.
Box 3 vacant value ratio
The vacant value ratio of rented property in box 3 will be adjusted/updated. The proposed update of the vacant value ratio means that in case of an annual rent of more than 5% compared to the WOZ value (property value), the percentage of the vacant value ratio will be increased to 100% (as a result of which there will be no discount on the WOZ value). With related parties It is also proposed to assume an increase of 100%. For these rental situations it means that the vacant value ratio will be de facto abolished for this component, as well as for taxpayers with a temporary lease, the government said.
Measures relating to gift and inheritance tax as well as transfer tax
Reduce and repeal gift exemption for own home
In line with the coalition agreement, the government proposes to repeal the increased exemption for owner-occupied houses as of 1 January 2024. Earlier this year, the cabinet informed the House of Representatives about the (im)possibilities of abolishing or lowering the owner-occupied home exemption as of 1 January 2023. Following this, the government proposed to reduce the owner-occupied home exemption as of 1 January 2023 to the amount of the exemption increased for one calendar year for gifts from parents to their children that is not subject to spending conditions (in 2023 €28,947).
In conjunction with the reduction from 1 January 2023 and repeal from 1 January 2024, it is also proposed to adjust the current possibility of spreading exempted gifts over several years.
Increase general transfer tax rate
The government wants to increase the transfer tax rate for buyers who will not be occupying the property themselves from 8% to 10.4%. This drastic measure thus affects rented property, second homes, holiday homes and commercial properties alike.
Business succession regime
For now, the business succession scheme (Dutch: BOR) remains intact. However, the government has indicated that in the coming years it will make efforts to tackle remarkable tax constructions and improper use of tax schemes in which the BOR is explicitly mentioned. Part of this will, in any case, include declaring the BOR no longer applicable to rented property. A government response will follow later this year in which the cabinet "will address what is needed to meet the agreements in the coalition agreement, namely supporting the continuity of family businesses by making real business succession simpler and fairer and countering improper use of the exemption." It remains to be seen what will come out of this.
Want to know more?
Would you like to know more about the Tax Plan 2023, the proposed changes and what this means for you? Then please contact Bianca de Kroon by e-mail or by phone: +31 (0)88 277 10 10 or Sanne Jansen - Verbakel by e-mail or by phone: +31 (0)88 277 12 08. They will be happy to help you.