Tax plan 2004

How the 2004 Budget will affect you

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On 16 September, the Cabinet presented its 'Miljoenennota'budget for 2004, which contains a raft of financial proposals. Arjan Enneman of Expatax summarises the main changes that will come into force from 1 January 2004 onwards if accepted by Parliament.


Personal tax credits and tax rates


The combined rate for the first bracket will change from 33.15 to 33.40 percent, and the second bracket will go up from 38.65 to 40.35 percent.


The personal tax credit will be rise to EUR 1, 829, the labour deduction will be EUR 1, 214, an extra combination credit of EUR 290 will be introduced and the child credit will be raised with EUR 68.


A special deduction for employees who will go on parentship leave using the new 'levensloopregeling' will be introduced. With the 'levensloopregeling' an employee can save a maximum of 12 percent of the salary which can be used to pay leave to support the family or for other personal matters.


Company car and travel allowance


Rules for company cars will be simplified. All the kilometres from home to work and back will be treated as business kilometres again. The percentage will be fixed at 20 percent instead of the different percentages we currently have (10 percent, 15 percent, 20 percent and 25 percent).


Besides a car registration, a statement from the employer may be sufficient to prove how many kilometres were driven with the car for private purposes. Since the graduations won't exist anymore this is only beneficial if the private kilometres are below 500.


In exchange the travel allowance for use of a personal car for business purposes will be reduced from EUR 0.28 to EUR 0.17 per kilometre. The allowance for kilometres from home to work and back can be given independent of the distance. Currently an allowance can only be paid if the distance is more than 10 kilometres. The allowance will now cover all the business trips. If an employee uses public transport the employer may decide to reimburse the actual costs or a maximum of EUR 0.17 per kilometre.


Pre-pension and VUT agreements


Pre-pension and other ways to retire earlier won't be facilitated with tax benefits anymore. This means, if the government gets its way, that the right for future payments will be taxed the moment the right is granted to the employee. Result on the other side is that payments themselves will be tax-free. Also the possibility to receive a redundancy package tax free will be terminated. The changes are scheduled for 1 January 2005 .


There is a big discussion in the Parliament going on about this subject. MPs want to keep the pre-pension but it is unclear how it must be paid.


Sale of the main residence - consequences for the mortgage


When a person sells a main residence he can only get a tax deduction for the interest which has to be paid on a mortgage that covers the selling price of the old property plus the higher value of the new property.


In other words, the proceeds must be invested in the new property completely. If part of the proceeds is used to buy something else or to invest in stocks the interest on the part of the mortgage that sees on these amounts can't be deducted.




Current mortgage EUR 200,000
Selling price current property EUR 250,000 
Buying price new property EUR 300,000


Maximum new mortgage will then be EUR 250, 000. The realised equity of EUR 50,000 in the current property is expected to be reinvested in the new property.


On the other hand people who don't have a mortgage anymore or have a very low mortgage will be favoured. The fixed income (0.8 percent of the WOZ value of the property) will never be more then the deductible interest and costs of the mortgage.


Extra allowance for long term disabled


The long term disabled who have no income or a negative income because they can not deduct their costs may receive a special allowance.


Modernisation of the social security system


  • The disability insurance for employees (WAO) will be reformed per 1 January 2006
  • In 2005, the disability insurance for self employed (WAZ) will be cancelled.
  • Employers will have to continue to pay salary in case of sickness for 2 years instead of 12 months.
  • The continuation benefit ('vervolguitkering') in the unemployed insurance will be cancelled which means that an unemployed person will have to go sooner to welfare after the first period the unemployment benefit has been paid.


Other measures


  • The special education deduction and pay over reduction for employers will be cancelled
  • The pay over reduction for research & development and child care will be raised
  • Taxes on tobacco will rise by 46 cents
  • The so-called 'Zalm-snip' will be cancelled. This is the EUR 45.38 reduction you should receive every year from your local government
  • The user part of the local property tax will be cancelled
  • Green energy won't be subsidized anymore
  • If you have filed a request for a provisional refund the tax office will send you automatically the same refund the next year unless you notify them about changes occurred in your personal situation.


The budget debate in Parliament had ended but the government has already indicated that it may be willing to compromise on some issues so while most of these proposals will likely come into force in January 2004 there is still a lot of house trading to be done.


19 September 2003


Expatax is a Dutch company handling all aspects of corporate and personal financial and fiscal issues.