The 2023 budget is aimed at tackling people struggling to make ends meet, as a result of the war in Ukraine, high inflation and rising interest rates.
But while there is €17.2 billion to support ‘vulnerable groups and people on middle incomes’, smaller businesses and freelancers may pay the cost.
Business organisation the VNO-NCW has praised the budget for boosting purchasing power but said that many employers are concerned about higher tax for major shareholders, a corporate tax raise and the cost of raising the minimum wage by 10%.
Employees better off
The government said that it is trying to better the ‘balance’ of the tax burden between employees and business owners.
For employees, there will be a marginal drop in the lowest rate of income tax (going from 37.07% this year to 36.93%), and the bracket will rise from €69,398 to €73,071. The tax-free allowance for employees will increase, meaning people in the lowest tax bracket should be €500 a year better off.
Some benefits will increase. Meanwhile, energy prices will be limited for average household use and an emergency fund will stop disconnection for non-payment – but there is no compensation for businesses, such as bakeries, which could be hard hit by energy costs.
Business to pay
‘It is a hard budget for business,’ says a Blue Umbrella expert. The first blow will be a rise in corporate tax from 15% to 19% at the lower tariff. The higher tax band will start at €200,000 instead of €395,000, and the top tax will increase from the current 25% to 25.8%.
Box 2, a tax levied on people with more than 5% of the assets in a company, will have two brackets from next year. Dividend profit up to €67,000 will be taxed at 24.5%, and above this, the rate will rise to 31% (up from the current flat rate of 26.9%).
Four tax benefits will be scrapped, including averaging income over three years, saving towards your pension within your company (FOR), and a rule to allow start-ups to pay the owner-director less. A simpler benefit covering 96% of childcare costs will be funded by dropping a tax break for families with two working parents (IACK). A tax break for freelancers will be decreased to €5,030 in 2023 and to €900 by 2027.
Rules will be tightened up about the amount that director-major shareholders have to pay themselves as taxable salary.
Box 3, which taxes savings and assets, will be changed to reflect actual earnings rather than ‘notional’ allocations. Savings up to €57,000 will be exempt from tax, and a tax of 34% will be levied on 0.01% assumed profit for additional savings. However, tax on investments and property will be 5.53%.
‘Big businesses can typically make a deal with the Dutch tax office, but small and medium sized businesses will have it hard,’ said the Blue Umbrella expert. ‘The focus is on the middle group, and not on the really rich.’
For advice about your tax situation, contact Blue Umbrella