What is the general tax credit?
General tax credit
Every taxpayer is entitled to the general tax credit, in Dutch: 'algemene heffingskorting'. A tax credit is a deduction on the tax calculated on your entire income based on the box system. So first your income is calculated and reduced with the applicable tax deductions. This leads to your taxable income. Tax is calculated based on the applicable tax rates. The tax amount you get is then reduced with the applicable tax credit. So unlike a tax deduction which reduces the taxable income, a tax credit immediately reduces the actual tax amount.
Payment of the tax credit to the partner
As said, every taxpayer is entitled to the general tax credit. So partners are each entitled to their own general tax credit. If one of the partners has no (or insufficient) income to be able to use the entire tax credit, the tax credit can be paid out by the tax authorities directly under certain conditions. Main condition is that the other partner has sufficient income and pays enough tax to cover the partners tax credit too. So the tax credit is paid out individually, but to determine whether both partners can get it the tax authorities look at the total income and the total amount of tax paid.
Reduction of the payment to the partner
The payment of the general tax credit to the non (or lowest) earning partner is reduced in a period of 15 years with 6.67% per year. This reduction started in 2009, which means that in 2012 maximum € 1.491 (73,33%) of the tax credit will be paid. Under certain conditions it is still possible to get the maximum tax credit though which is related to age and number of children.