On Budget Day, September 20, 2016, the Dutch Cabinet presented the package of measures for the 2017 Tax Plan to the Lower House.1 The proposals are intended to take effect on January 1, 2017, unless another date is explicitly stated.
In this GMS Flash Alert, we focus on those measures affecting individuals, including modifications to the tax brackets and rates, tax credits, and the basic allowance for foreign taxpayers in Box 3. In another, upcoming Flash Alert, we will focus on the budget measures affecting employers and supervisory directors.
The proposed personal income tax changes in the Netherlands may slightly increase assignment-related tax costs for international assignment programs. International assignment cost projections and budgeting -- for assignments to the Netherlands (where the expatriate tax regime is not applied) and for assignees outside the Netherlands still subject to Dutch taxation -- should take into account the changes once they are finally approved. Employers will need to make the necessary payroll adjustments and update hypothetical tax calculations for tax equalized assignees.
The tax rate in the second and third payroll tax and personal income tax brackets is 40.40 percent in 2016. As of January 1, 2017, the tax rate in both brackets will be increased by 0.40 percent to 40.80 percent. The third bracket will also be extended, which means that in 2017 the fourth bracket will start at a taxable income of more than EUR 67,072. As of January 1, 2017, the combined tax rate in the first bracket will be 36.55 percent (the same as in 2016).
As of January 1, 2017, the tax rates for employees born after January 1, 1946 will be (figures in bold are current rates/brackets):
|Taxable salary more than||but not more than||Tax rate||National Insurance Contributions|
|EUR 0||EUR 19,982 (19,922)||8.90% (8.40%)||27.65% (28.15%)|
|EUR 19,982 (19,922)||EUR 33,791 (33,715)||13.15% (12.25%)||27.65% (28.15%)|
|EUR 33,791 (33,715)||EUR 67,072 (66,421)
|EUR 67,072 (66,421)||-||52%||-|
The general tax credit will be increased to EUR 2,254. The amount of the general tax credit is dependent on a person’s income. The higher the income, the lower the general tax credit. For incomes of EUR 66,726 and above, the general tax credit will be nil.
The maximum labor tax credit will be increased to EUR 3,223. The amount of the labor tax credit is dependent on a person’s income. The higher the income, the lower the labor tax credit. For incomes of EUR 121,972 and above, the labor tax credit will be nil.
As of January 1, 2017, the fact that (non-qualifying) foreign taxpayers will also be able to take a basic allowance into account in Box 3, when determining their benefit from savings and investment in the Netherlands, will be laid down in law. (This concerns a codification of the approval that had already been given in the policy statement dated April 25, 2016.)
1 For the government’s press release on the budget (in Dutch) including links to budget documentation, visit this page.
This article is excerpted, with permission, from “Budget Day 2016: changes to payroll tax and social security contributions, the R&D remittance reduction and the Box 3 taxation of foreign taxpayers,” (September 22, 2016), a publication of the KPMG International member firm in the Netherlands, Meijburg & Co. For the complete report, visit this page.
For additional information or assistance, please contact your local GMS or People Services professional or the following professionals with the KPMG International member firm in the Netherlands:
Tel. +31 (0)88 909 1498
Tel. +31 (0)88 90 92631
The information contained in this newsletter was submitted by the KPMG International member firm in the Netherlands.
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