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Tax measures in the Netherlands for 2008

The previous Balkenende government promised that sweet comes after sour. In the 2008 budget by the new Balkenende government, apparently the cycle is at its beginning, as we will have to look hard for the sweet between all the sour.

The government budget bottom-line is a surplus, and in achieving that task with costs and expenditures rising, hardly any of the economic growth will be reflected in 2008 net family income.

Even though economic and demographic trends point towards the need for tough and principal reform measures for quite a number of years, for example in the fields of tax expenditures on owner-occupied houses and coverage of future old age pension expenditures, this budget does not contain such reform measures.

Further, in order to attract economic activity, much effort has been put in decreasing the tax burden for enterprises. A logical next step would be to decrease the tax burden on labour income, but the 2008 tax budget shows only very limited efforts in that field.

For the Expatica audience it is important to note that no measures have been proposed to decrease the tax or regulatory burden on knowledge workers or expatriate employees.

  • The in-kind benefit for private use of a company car has been increased to 25 percent from 22 percent of catalogue value of the car. The increase makes room for a decrease of the in-kind benefit to 14 percent from 22 percent for very environmentally-friendly cars, along with an increase of BPM tax relief for such cars when first put into use. Excises on diesel and lpg will be raised. As of 2011, tax per mile or car usage taxation will be introduced gradually, along with a gradual reduction of BPM tax on new cars;
  •  As the government accord stipulates that mortgage interest deduction for owner-occupied houses should be left untouched, it is proposed to substantially increase the in-kind benefit for valuable homes. The tax increase is scheduled for 2009, leaving time to anticipate. The tax increase is separated into two measures: abolishment of the maximum in kind benefit (affecting homes of a value exceeding EURO  1.66 M) and increase to 2.35 percent (from 0.55 percent) of the part of the home value that exceeds EURO 1 M;
  • Unemployment benefit premiums for the employee have been slightly decreased to 3.5 percent from 3.85 percent, on the way to abolishment in 2009;
  •  As of 2011, additional taxation is proposed on higher income groups receiving pension benefits;
  • The labour tax credit (also translated as levy rebate) as well as the additional combination tax credit (for workers with lower income and young children) has been increased to make labour income more attractive compared to benefits. This will mainly affect lower income groups;
  • Payout of the basic tax credit to non-working spouses will be phased out in 15 years;
  • Health care policy premiums are no longer deductible, along with a drastic decrease of the deduction threshold to 1.65 percent (from 11.5 percent) of aggregate income. As of 2009, the entire health related deduction facility will be reformed;
  • As of 1 July 2008, an environmental charge will be levied on plane tickets for leaving passengers (transit passengers are exempt). The charge amounts to EURO 11.25 (eleven euro and 25 euro cents) for EU destinations and distances to 2500 kilometres, EURO 45 for other destinations. Critics argue that this charge violates international treaties. Another environmental charge is levied from enterprises producing more than 15000 kilos of packaging material per annum;
  • Corporate income tax rates on profits up to EURO 200,000 are decreased.

Please note that the above is only a brief summary of 2008 tax budget proposals, therefore amendments during parliamentary discussion are possible.

Note: On 3 January 2008 we took out any budget proposals which have not been adopted. The article is currently up-to-date.

17 October 2007 (updated 3 January 2008)

Frank de Bats – Tax Lawyer

De Bats Beheer BV – 27155273
Herberg 63 – NL-2264 KP Leidschendam

Telephone: +31 6 201 29 830
Fax: +31 84 728 729 6
[email protected]

[Copyright Expatica 2007]