Tax plan 2021

In this article we will go over the following topics in regard to the 2021 taxes, according to the law tax plan 2021. At this point, this is not yet a definitive legislation. Furthermore, we will go over some Corona measures that are a continuation of measures taken in 2020 and have been included in the same legislation. 

1. Income tax tariff and deductions

2. Decreasing independent deduction within 16 years

3. Wage taxes: training costs old employees

4. Corona measures

5. Partnership taxes

6. Job orientated investment discount (BIK)

Appendix: Corona measures and overview duration (status 1 december 2020)

1. Income tax tariff and deductions 2021

Tax brackets and tariffs 

The income tax has two brackets currently. The first brackets is taxed with a tariff of 37,1% and the second bracket, starting at an income of €68.507 has a tariff of 49,5%. 

For seniors the first bracket tariff is 19.2%, from €35.000 the tariff is 37,1% and from €68.507, there is a third bracket, with a tariff of 49,5%.

Deductions

General tax deductions

The general tax deduction will increase with €126 to €2.837. You will receive the maximum amount of tax deduction with €21.043 in income and decreases if you have more income. The deduction is zero with an income of €68.507. 

Labour deduction 

The labour deduction increases with €386 to €4.205. You will receive the maximum labour deduction with an income of €35.000. The deduction is zero with an income of €110.000. 

Combination deduction (IACK = inkomensafhankelijke combinatiekorting*)

*Income dependent combination discount 

This is a discount for everyone with children below the age of twelve and who works. The maximum amount is €2.815 and ranges from zero with an income of €5.153 up to the maximum with an income of €30.000. 

Senior deduction 

The senior deduction increases to €1.703. The decrease of the deduction above an income of €37.970 will gradually go up to zero with an income of €50.000. 

Payout tax credit

When the tax credits are not, or not entirely, cashed in by the partner earning the least this is paid out to that partner. Provided that the partner earning the most has paid their taxes in full. When you meet these requirements, the right is dependent of your age. Are you born before 1963? Then you are entitled to the complete tax credit of €2.837. When you are born after 1963 than the amount is much lower; €379 to be precise. 

Adjustment Box 3

The tax-free capital will be raided to €50.000 in 2021. Pay attention though; the tax rate will go from 30% to 31%. Read more about that in this article. 

2. Reduction independent deduction in 16 years

The independent deduction is €7.030 in 2020, but will decrease with €360 in 2021 to €6.670 and will gradually decrease over the next 16 years to €3.240 in 2036. 

3.  Wage taxes

When the employer pays for training expenses of an employee, then they will not have to pay taxes over those expenses. Now, that also applies to ex-employees. 

4. Corona measures

Many measures are probably already outdated when this article is published. The appendix will have the complete list of all current measures. However, we will focus on a few key topics in the following paragraphs. The hourly criteria for the independent deduction for the period of March 1st until October 1st has been arranged that you will have worked an average of 24 hours a week, even if in reality you have worked less in this period. For those unable to work due to a disability those hours have been set to 16 hours a week. The income from TOGS (compensation for Covid-19 damages) and TVL (compensation fixed expenses) are not taxed in the income or partnership taxes. You will also receive VAT-exemption for outsourcing healthcare staff. 

5. Partnership tax

Adjustment rate

The partnership tax rate will be reduced from 16,5% to 15% in 2021. Anything above the bracket threshold of €245.000 will be taxed at a rate of 25%. See the table below. 

Adjustment loss relief

The loss relief will change to unlimited in the future and one year in the past. This used to one year in the past and six years in the future. However, the flexibility is dependent on the amount of profit, the profit up to €1milion can be used to settle this in its entirety. However, profit exceeding €1milion can only be used for 50% when settling losses. 

Approach informal capital structures

Starting in 2022 it is no longer possible to deduct expenses from profit in the Netherlands when the other party will not pay enough taxes abroad on the income/benefit balance within corporations. 

Innovation box 

The lowered rate will increase when it comes to income in the innovation box. The rate in 2021 will be 9%, in 2020 this was 7%. 

6. Job orientated investment discount (BIK)

Companies that make an investment in 2021 and 2022 will receive a investment deduction. That deduction can be settled with the wage taxes that need to be paid. The deduction is 3,9% for investments up to €5.000.000. Any investments above that amount will receive a 1,8% deduction. 

Appendix: corona measures and overview duration

To help entrepreneurs as well as possible during the corona crisis, several tax measures have temporarily been eased. A large part of these adjustments will continue up to the first of October 2020. The consequences of the coronavirus will not, however, have been solved. Therefore, parliament has decided to extend a few measures. These measures are necessary in the current 1.5 meter society we live in. The parliament will also make statutory provisions of some of these measures in the Tax Plan 2021. For example the net healthcare bonus. By doing so, the entrepreneurs have a legal base for, among other thins, administration and future tax declarations. 

Note: Per december 14 the Netherlands went into a lock down. It means that som of the below measures will be extended. Like the deferral of payment of tax and when to start paying back the owed tax.

*This measures has been recorded in the Tax Plan 2021

*Income dependent combination discount