2010 Tax Plan: More enterprise, and fewer barriers to enterprise
More enterprise, and fewer barriers to enterprise’ is the key idea underlying the proposals in the 2010 Tax Plan. ‘Entrepreneurs are the backbone of our economy. They are the engine that powers job creation, productivity and growth. That’s why my proposals are all about making enterprise simpler and more attractive,’ explained State Secretary for Finance Jan Kees de Jager.
The government has looked with the business community at where improvements can be made and where barriers to enterprise can be removed. These are some of the proposals:
- Innovation box’ for R&D. The ‘patents box’ scheme is being turned into an ‘innovation box’ for innovative entrepreneurs. This means that income derived from research and development will only be taxed at a rate of 5%. In addition, the ceiling for the scheme will be scrapped.
- Cash flow boost. To enable entrepreneurs who are facing difficulties to increase their cash flow, they will have the option of setting off losses in 2009 and 2010 against profits made in the three previous years. And the option of accelerated depreciation will continue to be available in 2010.
- Profit exemption raised. The profit exemption for SMEs is being raised by 1.5 percentage points to 12%. In addition, the qualifying criterion that you must spend at least 1,225 hours on your business is to be dropped. This will make it more attractive to carry on a business alongside salaried employment.
- Big increase in small-scale investment tax credit (KIA). To foster business growth, there will be a 29% increase in the KIA.
- Stimulus for directors/major shareholders. A package of measures is proposed that will benefit people who are directors of a company in which they are also major shareholders (DGAs). It includes an extension of the arrangement under which a DGA can pass on a business to a co-entrepreneur without any income tax consequences (doorschuiffaciliteit) and a relaxation of the customary pay arrangements (gebruikelijkloonregeling).
The Tax Plan includes a number of separate legislative proposals, including a bill to simplify certain tax rules and a bill to introduce a standard definition of salary. This will help reduce the administrative and regulatory burden. The radical simplification of complex rules would, said the State Secretary, ‘yield long-term cost reductions for business in excess of half a billion euros. One definition of wages is something people have been advocating for years. I’m delighted that this government is taking this historic step.
The main simplifications:
- A new work-related costs scheme. An exemption of 1.5% of the wage bill for tax purposes is to replace 29 categories of tax-free allowances and benefits in kind from employers (e.g. for working clothes, Christmas hampers, bicycles etc.)
- ‘Small jobs’. As of 2010, employers will no longer be required to deduct social insurance contributions and healthcare insurance contributions from pay to employees under 23 who earn less than the threshold salary. As of 2011, the same will apply to the levying of wage withholding tax.
- One definition of wages. There will be a standard definition of wages for wage withholding tax, various social insurance contributions and the income-related healthcare insurance contribution. This represents a saving for employers of some €380 million. For employees, this will mean shorter, clearer and simpler salary statements.
Other measures proposed by Mr De Jager:
- A package of VAT reductions, including:
- painting and plastering homes older than two years
- domestic cleaning o modern educational media such as CD-ROMs
- Support for innovation in the automotive industry, e.g.:
- no lease-related notional income on electric cars in 2010 and 2011
- no motor vehicle tax for highly fuel-efficient cars
- higher deduction of €700 from purchase tax on fuel-efficient cars.