21 September 2004
The 2005 Tax Plan contains tax proposals that are in direct relation with the government coalition agreement and the 2005 policy package. Priorities include targeted income support, strengthening the Dutch business climate, and greener taxes. The Plan is part of the 2005 Tax Package.
The 2005 Tax Package comprises the following legislative proposals:
1. 2005 Tax Plan
2. Other Tax Measures in 2005 (already submitted)
3. implementation of the Amendment to the parent-subsidiary directive
4. implementation of the Amendment to the directive on assistance with the levying of taxes
5. implementation of the Amendment to the directive on assistance with the levying of taxes
The main measures in the 2005 Tax Plan are outlined below.
To improve the income of old age pensioners, minimum wage earners and families with children, the Government has devised a wide range of measures. The Tax Plan deals with the tax components, and comprises the following measures:
The funds for these measures will be generated by abolishing the ‘private PC scheme’ with effect from 17:00 on 27 August 2004, and making it impossible for employees to make use of the salary savings scheme with more than one employer in any one year.
Revenue from the increase in energy tax (as part of the corporation tax measures) will be channelled to private households through a €13 increase in the general tax credit (on top of a €30 increase to compensate for loss of purchasing power).
The measures proposed in the 2005 Tax Plan, together with the measures in the coalition agreements and the 2004 Tax Plan, will result in a 0.85% increase in the overall rate of the first tax band and a 1.45% increase in that of the second tax band. The rates for the first and second bands will then be 34.40% and 41.95% respectively.
Corporation income tax reduction
The corporation income tax reduction and related measures are dealt with in a separate press release.
Facilitating business transfer
The exemption from inheritance and gift tax on the value of a business which is being transferred will be increased. Under certain conditions, 30% of business assets are currently exempt from this tax when a business is transferred. This exemption will be raised to 50% of the value of the business.
An employee or entrepreneur who wants to continue a business currently has to work with the seller for three years in order to make use of the tax-free transfer scheme for income tax purposes. The proposal is to shorten this period to two years.
Exemption from transfer tax for urban restructuring
To promote investment in urban restructuring in general and the development or redevelopment of industrial estates and urban business locations in particular, an exemption from transfer tax will be introduced for urban restructuring.
Increase in research and development rebate
The tax rebate for research and development will be increased, in order to promote process innovation. To improve productivity, the Netherlands will increasingly have to organise production processes more smartly.
In line with the Policy Document on Traffic Emissions, the 2005 Tax Plan includes the following measures:
For charities, the tax rate for gifts and legacies is currently 11%. This will be reduced to 8%. The report by the working group on the modernisation of the inheritance tax act recommended a general exemption for charities. However, as the government policy paper pointed out, there are no funds available to pay for a general exemption.
The Tax Plan proposes that share option rights should be taxed solely when the option rights are exercised or sold. The option regime for salaries tax purposes will thereby be abolished. This regime allowed taxpayers to opt for tax to be levied either when an unconditional share option right is assigned or when a conditional right of option becomes unconditional, or when the option right is exercised or sold.
This measure will make it impossible to realise untaxed (or partly untaxed) option profits, since no further options are possible and tax must always be paid on the actual gains. This will bring the situation in the Netherlands more into line with international practice, since most other countries levy tax when option profits are realised.
To prevent double taxation, transitional provisions will be introduced for options which were assigned unconditionally before 1 January 2005 and conditional options that become unconditional before that date.