Dutch Budget Day 2023: Impact of tax proposals on multinational enterprises

The Dutch Ministry of Finance presented its 2023 budget to the Dutch parliament on September 20 2022. Draft tax proposals for 2023 onwards are part of the budget and will be discussed by parliament and the Senate within the coming months.

If enacted, the tax proposals are expected to enter into force on January 1 2023. Proposals that would enter into force on January 1 2024 or later have also been announced.

As of January 1 2023, the lower corporate income tax rate of 15% will increase to 19%. Furthermore, the lower bracket of the corporate income tax rate of 19% (as of 2023) will revert from €395,000 ($394,000) to €200,000. These changes are accompanied by rate changes in the personal income tax sphere and are mainly intended to bring the effective tax rate of self-employed individuals closer to those of employed individuals.

Expansion of payroll tax exemptions and limitation of 30% ruling

As of January 1 2023, employers can reimburse work-related travel costs of employees tax exempt up to €0.21 per kilometre, up from €0.19 per kilometre in 2022. The government has announced a further increase in this tax exemption to €0.22 per kilometre in 2024.

Furthermore, the government has proposed an expansion of the generic exemption in the work-related costs scheme applicable to the first €400,000 in wage sum from 1.7% to 1.92%. Although the amendment is mainly aimed at small and medium enterprises, the expansion is generic in nature and applies to all employers.

Finally, the Dutch government proposes to limit the 30% ruling, which allows employers to pay 30% of the salary paid to an expatriate seconded to the Netherlands free from Dutch wage tax as a deemed reimbursement of costs incurred by the expatriate employee for moving to, and living in, the Netherlands. For 30% rulings that take effect as of January 1 2023 or later, the amount subject to the 30% tax exemption is capped at €216,000 annually, which coincides with the maximum public sector pay. For 30% rulings that took effect on or before the final payroll tax period of 2022, this cap enters into effect as of January 1 2026.

The draft tax proposals for 2023 onwards also contain several environmental tax proposals. For instance, the CO2 levy for industry will have a higher reduction factor, resulting in industrial companies having to pay the CO2 levy for industry sooner than would otherwise have been the case. This change is intended to encourage companies in the industrial sector to reduce their CO2 emissions faster than they are.

In order to enable taxpayers to further reduce their CO2 emissions, the Dutch government is increasing the budget for environmental investment credit (MIA) by €50 million annually and the budget for energy-saving investment credit (EIA) by €100 million annually.

Finally, the government has proposed to increase the real estate transfer tax rate applicable to non-primary residences and non-residences from 8% to 10.4% as of 1 January 2023.

There are two relevant future changes that have been announced.

Firstly, the Dutch government announced its intention to put forward a legislative proposal in 2023 that would prohibit one of the Dutch fund vehicles, the fiscal investment institution (FBI), from directly owning real estate as of January 1 2024. Due to the complexity of the legislation and the necessity to review the need for exemptions of real estate transfer tax for forced restructurings, this legislative proposal could not be published in 2022.

Secondly, the Dutch government announced its intention to review tax legislation and to get rid of certain tax facilities that are not being used as intended, are inefficient, or are ineffective. The government aims to raise €550 million on a structural basis with this review. It is therefore likely that this review will result in legislative proposals in 2023 and 2024.

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