Concurrence of loss setoff and exemption for debt relief income

As of 1 January 2022, a limitation of loss setoff applies and losses over EUR 1 million are only eligible for setoff up to 50% of the remaining taxable profit. This may result in a situation where, despite the existence of an exemption for debt relief income in any year, corporate income tax is still payable on part of the debt relief income. Since this may constitute an obstacle in restructurings, the government proposes to fully exempt debt relief income in situations where offsettable losses exceeding EUR 1 million are available.

Liquidation loss scheme

Two adjustments are proposed for the liquidation loss scheme. In line with the aim of the scheme, the government first of all proposes that a write-down of a capitalised receivable reversed by the taxpayer should always be taken into account when calculating the amount paid for a participation. So, going forward, this will also apply even if the revaluation reserve has not been used. Furthermore, the government proposes to amend the application of the intermediate holding provision in the liquidation loss scheme. The objective of this amendment is to prevent conversion - contrary to the aim of the scheme - of an essentially non-deductible loss on sale of an indirectly held participation into a deductible liquidation loss on an immediately held participation.

Sister company merger

Current law provides that a simplified sister company merger, where all shares in the merging companies are held directly by the same person, is excluded from the scope of tax regulations applicable to mergers. This is because no shares are issued in these situations, which is what these tax regulations assume. In order to be in line with civil law reality, the government proposes to include simplified direct sister company mergers in the scope of the tax rules applicable to mergers.

Aftercare for Act on the tax qualification policy for legal forms

Last year, a bill was passed that will change the Dutch qualification policy for legal forms by 2025. A major change resulting from this legislation is that open limited partnerships and foreign open limited partnerships will in principle become fiscally transparent. From 1 January 2025 onwards, this transparency would prevent companies from being affiliated under Article 10a Dutch CITA 1969. To avoid this, the government proposes to designate these entities as affiliated entities. The same applies to non-comparable foreign entities that are deemed to be transparent. The same also seems to apply to entities that already qualify as transparent under current law (such as private limited partnership-like entities). The Tax Plan also includes a number of additional - technical - amendments. Unfortunately, it does not revisit the possible requalification of limited partnership-like entities into mutual funds.

Adjustment of box 1 rates

A new rate bracket will be introduced in Box 1 in 2025, in which income up to EUR 38,441 will be taxed at a lower rate (35.82%). For taxpayers born before 1 January 1946, this limit is at EUR 40,502. The proposed bracket limits and rates are as follows:

Adjustment of tax credits

The government proposes, inter alia, to reduce the maximum general tax credit and to link the phasing-out point of this tax credit to the statutory minimum wage. As the phasing-out point of both the general tax credit and the employment tax credit is linked to the statutory minimum wage, the phasing-out point of these tax credits will only become final after the statutory minimum wage is set in November 2024.

In addition, the government plans to reintroduce a transferable general tax credit from 2028, but only for a limited group of taxpayers affected by an unintended concurrence of taxation, benefits and social security. Pending this solution, the government opts to give affected households a fixed allowance for the years 2025, 2026 and 2027, as much as possible ex officio.

Adjustment of self-employment persons’ tax deduction and SME profit exemption

The self-employed persons’ tax deduction will be reduced to EUR 2,470 in 2025 (2024: EUR 3,750). The SME profit exemption will reach 12.7% in 2025 (2024: 13.31%). This reverses the additional reduction of this exemption to 12.03% as previously announced in the 2024 Spring Memorandum.

Box 2 rate cut

The top rate of the second bracket of box 2 will be reduced from 33% to 31% by 2025. With this, the government wants to improve the overall balance in terms of taxation between the directors and major shareholders on the one hand and entrepreneurs for income tax purposes on the other. This will reverse the rate increase introduced by the 2024 Tax Plan.

Deductibility of costs and charges related to ‘non-independent workspace’ that is part of an entrepreneur’s assets

The government wants to enshrine in law the case law and existing practice regarding costs and charges related to a ‘non-independent workspace’ (niet-zelfstandige woonruimte, a workspace that is not separately lettable and does not have its own sanitary facilities, energy supply and entrance) that is part of an entrepreneur’s assets. This clarifies that costs and charges related to such a workspace - and that are usually borne by a tenant in a rental situation (such as expenses for furnishing and gas, water and light) - are not eligible for deduction.

Prevention of double counting of excessive borrowing in partnerships

The government has proposed measures to prevent double counting when applying the Excessive Borrowing from One's Own Company Act (Wet excessief lenen bij eigen vennootschap). This concerns situations where taxpayers participate in a partnership and where one or more participants also have a substantial interest in, for example, a private limited company that has provided a loan to that partnership. The proposed measure regulates that liabilities arising from the connection of participants in a partnership are excluded from the concept of debt. In addition, an aggregation provision will be introduced for situations where a debt of more than nominal value is taken into account among different taxpayers participating in a partnership. The government proposes to introduce these amendments with retroactive effect to 1 January 2023.

Limitation of deduction for gifts

The government plans to abolish the deduction for gifts in corporate income tax with effect from 1 January 2025. On top of that, plans are to cancel the dividend withholding tax and income tax effects of the scheme governing gifts of business assets (regeling geven uit de vennootschap) as of 1 January 2025. From this date onwards, all corporate gifts made for shareholder motives will qualify as distributions of profits to shareholders that are subject to dividend withholding tax and income tax (box 2). The deduction for gifts in income tax will remain unchanged. The government thus abandons its earlier intention to unify the income tax treatment of periodic gifts and other gifts.

Formal aspects MIA and Vamil

The role of the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland, or ‘RVO’) in applying the environmental investment credit (milieu-investeringsaftrek, or ‘MIA’) and the arbitrary depreciation of environmental operating assets (willekeurige afschrijving op milieubedrijfsmiddelen, or ‘Vamil’) will be increased, since from now on eligibility for these facilities will be determined through a decision open to objection. This has already applied to the energy investment credit (energie-investeringsaftrek, or ‘EIA’) for some time.

Reversal of cuts in 30% facility

Following an amendment to the 2024 Tax Plan adopted by the House of Representatives, the 30% facility for reimbursement of extraterritorial expenses has been cut back with effect from 1 January 2024. Although the total term of the facility is still 60 months, the percentage that can be designated as reimbursement for extraterritorial expenses has dropped from 30% in the first 20 months, to 20% in the next 20 months and ultimately 10% in the last 20 months. Moreover, since 2024, the basis for calculating the 30% facility is capped at EUR 233,000.

Since these adjustments put pressure on the Dutch business climate, the government wants to largely reverse these cut-backs and return to a fixed rate. In 2025 and 2026, this will be 30%. From 2027, 27% of the salary can be designated as untaxed compensation for extraterritorial expenses during the entire application period of the facility. On the other hand, the salary standard will be slightly increased as from 2027. The new facility will apply to employees for whom the 30% facility was first applied on or after 1 January 2024. Transitional law applies for employees who already used the 30% facility before 2024.

Final levy on delivery van

The final levy for private use of a delivery van that is used alternately by several employees has been EUR 300 ever since the scheme was introduced in 2006. This amount will be increased to EUR 438 from 1 January 2025 and will be indexed annually from 2026.

Technical changes

Several adjustments will be made to the specific exemption for public transport season tickets to better reflect the legislator's intention. On top of that, a number of adjustments of a more technical nature will be made to prevent tax deferral in the event of non-regular settlement of a self-administered pension, a right of entitlement to periodic payments, or a compulsory old-age provision.

Adjustment of business succession tax facilities

In addition to the measures laid down in the Business Succession Tax Facilities Amendment Act 2024, part of which have already entered into force on 1 January 2024 and many of which will take effect on 1 January 2025, the 2025 Tax Plan package includes the Business Succession Tax Facilities Amendment Act 2025. This Act contains the following measures:

1. Access to the business succession scheme (bedrijfsopvolginsregeling, or ‘BOR’) and the transfer facility (doorschuifregeling, or ‘DSR ab’) will be restricted to ordinary shares with a minimum interest of 5% of the issued capital

This measure will enter into force on 1 January 2026 and is rooted in the wish to restrict access to the business succession facilities to actual business successions, without jeopardising business continuity. This seeks to align with shareholdings representing a substantial economic interest.

What’s more, with effect from 1 January 2026, the BOR and the DSR ab will no longer be open to non-ordinary shares, profit-sharing certificates, options, interests in cooperatives, and tracking stocks. Also, substantial interests under the equivalence provision (meesleepregeling), or fictitious substantial interests will then no longer be considered to be qualifying interests for the purposes of the business succession facilities.

Under the current Act, preference shares are eligible for the BOR and DSR ab, provided they have been issued as part of a phased business succession. As yet, though, there is no clear definition of ‘preference shares’, which has prompted the proposal for a legal definition of preference shares as ‘shares that take priority in respect of profit distribution or liquidation proceeds’. If shares take priority only in respect of part of the paid up capital, preference shares will only exist if the priority is substantial compared with the part of the paid-up capital of those shares that does not have priority.

The internet consultation showed this definition to create ambiguity and uncertainty in situations of hybrid shares (shares with characteristics of both preference shares and ordinary shares). The government intends to issue a memo of amendment in which it introduces a measure under which, as from 2026, hybrid shares will be notionally split into preference shares and non-preference shares for the purposes of the BOR and the DSR ab. Thus, only the value attributable to the preference component will qualify as a preference share. Provided the applicable conditions are met, the remaining component may qualify for application of the BOR and DSR.

2. Relaxation of the holding and continuation requirement in the BOR

The relaxations make it easier for entrepreneurs to restructure during the holding and continuation period, without the restructuring affecting the BOR. This is subject to the condition that the entitlement or interest of the shareholder in the business does not materially change.

In addition, the continuation period will be shortened from five to three years from 1 January 2025, reducing the period during which the successor will be bound by the requirements governing continuation.

3. Addressing unintended use of the BOR at a (very) high age

To counter this unintended use of the BOR, the government proposes to extend the holding period for testators and donors, from 1 January 2026, if they have started a business later than two years after the state pension age. This extension will increase incrementally (6 months per year) as the age increases, with no maximum.

4. Addressing specific arrangement in respect of business succession carousel

An anti-abuse measure is proposed for all situations where someone sells a business, after which they inherit or are gifted this business later on again, with application of the BOR. This measure intends to exclude application of the BOR to the extent that the business has been owned by the acquirer at any previous time, capped at the amount of the previous sale price that related to the business assets. The measure will take effect from 1 January 2026.

5. Amendment of the effective date of the extension of the dilution scheme and access for small family interests

In an effort to avoid the possibility of unauthorised state aid, these measures - which are part of the Business Succession Tax Facilities Amendment Act 2024 - will not enter into force on 1 January 2025, but only on a date to be determined by royal decree.

6. Other measures, consisting of netting the debt on property made available and technical improvements.

The government proposes to calculate the BOR exemption in the case of immovable property made available on the basis of the balance of the value of the property and the associated debts, and to implement some improvements from a legal and technical perspective. In addition, it is proposed to correct the calculation of qualifying business assets in the case of operating assets that are used both privately and for business purposes by including debt capital on a pro rata basis, to avoid unwanted negative outcomes.

Transfer tax rate

Effective from 1 January 2026, the transfer tax rate on homes will be reduced to 8%, down from 10.4%. This concerns homes not intended for long-term self-occupation, but for instance for investment properties or holiday homes. The government thus wants to encourage investment in rented housing. The rate of 2% will continue to apply to the acquisition of homes intended for long-term self-occupation. The exemption from transfer tax for first-time buyers (‘exemption for first‑time buyers’) will remain in place as well.

Exemption for first-time buyers and reduced rate in respect of acquisition of beneficial ownership

The government proposes to extend the exemption for first-time buyers and the reduced transfer tax rate for the acquisition of homes to the acquisition of beneficial ownership. This is subject to all other conditions for application of the exemption or reduced rate being met, including the obligation of self-occupation. The legislator thus wants to prevent more transfer tax being payable in cases where acquisition of the legal ownership is preceded by an acquisition of beneficial ownership. Subject to certain conditions, so-called house key agreements are even completely exempted from the acquisition of beneficial ownership.

Abolition of reduced rate on arts, culture, sports and hotel accommodation

The government proposes to abolish the reduced VAT rate of 9% on art, culture, sports, and hotel accommodation as of 1 January 2026, and replace it with the general VAT rate of 21%. This change aims to generate additional tax revenue and to simplify the tax system.

• The reduced VAT rate will no longer apply to the rental of hotel rooms, furnished holiday homes, or mobile homes. Short-term accommodation for, e.g., asylum seekers, homeless people, workers, and students will also fall under the general VAT rate. However, the letting of camping sites will remain taxed at the reduced VAT rate.
• The reduced rate will also no longer apply to most ‘cultural goods and services’ such as the supply of art, supply and rental of both physical and digital books, school books, newspapers, weekly journals, periodicals, and access to museums, music, theater, and dance events. On the other hand, access to amusement parks, playgardens and ornamental gardens, day recreation, circuses, zoos, and cinemas will still be taxed at the reduced rate.
• Access to sports events and providing opportunities for sports and swimming will no longer fall under the reduced VAT rate either.

The legislative proposal includes a transitional provision to prevent the reduced rate from being applied through advance payments well after 1 January 2026. The abolition of the reduced VAT rate for these specific services and goods is expected to lead to a increase in preliminary consultations and legal disputes with the tax authorities.

Termination of netting scheme from 1 January 2027

The netting scheme for electricity will be terminated from 1 January 2027. From 2027, households and businesses will be reasonably compensated for any energy fed back. This will replace the current scheme, under which this electricity is offset against the electricity purchased. Such compensations may not be negative and should be reasonable and competitive.

CO2 tax greenhouse horticulture

The definition of energy companies for greenhouse horticulture will be tightened: a company will be subject to the CO2 tax if at least 75% of the heat generated through natural gas is supplied directly or indirectly to greenhouse horticulture companies.

The CO2 tax rates have been revised and reduced for the period of 2025-2028, with a final rate of EUR 17.70 per tonne of CO2 in 2030. The Tax Administration will take over the implementation of the CO2 tax, while the first tax returns for the years 2025 and 2026 will start from 2027.

Motor vehicle tax credit for emission-free passenger cars

Currently, owners of an electric passenger car do not pay motor vehicle tax. From 1 January 2025, this will become a quarter rate. This tax credit was set to end effective from 1 January 2026 and due to the higher weight of electric passenger cars, their owners would be subject to a significantly higher motor vehicle tax than if they would have owned a comparable petrol car. The government therefore plans to introduce a new 25% tax credit for emission-free passenger cars in the years 2026 through 2029. This tax credit is lower, for that matter, than what was announced in the 2024 Spring Memorandum. Whether the tax credit for electric passenger cars is high enough will be reviewed in the spring of 2025.

Changes to private motor vehicle and motorcycle tax (‘BPM’)

The separate rate table for plug-in hybrid vehicles in BPM will be abolished from 1 January 2025. The reason is the introduction of a new measurement method for CO2 emissions, which would significantly increase the BPM payable for PHEVs under the separate table.

The BPM exemption for vans will also be cancelled in 2025. This will be replaced by a flat-rate scheme for e-vans for which no CO2 emissions data is available.

Extension of penalty period for participants

Usually, the time limit within which a default penalty or an offence penalty can be imposed on a person other than the taxpayer, such as a co-perpetrator or an accomplice, is linked to the time limit within which a tax assessment can still be imposed on that taxpayer. This does not apply, however, in cases with an extended period for additional tax assessments. This could result in situations where an additional assessment with a penalty can still be imposed on the actual taxpayer, while it is no longer possible to impose a penalty on any other ‘participant’ in the offence that has been established. The legislator proposes a term extension of up to 12 years for such cases.

Interest on tax

Since 1 October 2020, the interest on tax scheme contains a delegation clause that provides for interest rates to be set by order in council. This should allow for a more flexible response to changed circumstances. Until now, however, the delegation clause did not provide for the possibility to apply different rates for interest on tax to either be charged or reimbursed. Partly in response to a Supreme Court ruling, the legislator has decided to enable this as from 2025.

The interest on tax rate is expected to arrive at 9% for corporate income tax, minimum tax and withholding tax and 6.5% for the other taxes by 1 January 2025.

Interest on overdue tax

Effective from 1 January 2027, calculating any interest on overdue tax when losses are set off will be realigned with the legislator’s intention. Hence, interest on overdue tax will be charged in the event of a loss carry back with a tax assessment for which the payment period has expired. However, interest on overdue tax will not be charged if setoff takes place against a tax assessment relating to the same tax and the same period, i.e., in situations where an assessment has been set too high.