The Netherlands: Budget Day 2025 and Tax Changes Announced

| Image Credits: Binnenhof (Dutch Parliament) in The Hague at night, by rboed, licensed under CC BY 2.0.

On September 17, 2024, also known as Dutch Budget Day 2025, known in the Netherlands as Prinsjesdag, the Dutch Cabinet has released its budget plan for 2025, outlining a total spend of €457 billion and a projected revenue of €425.1 billion, leaving a deficit of €31.9 billion. Despite this shortfall, Finance Minister Eelco Heinen emphasized the need for careful spending and fiscal responsibility, focusing on long-term financial stability. Here are the key tax-related highlights from the budget that will impact both individuals and businesses:

• Income Tax Changes:

• The Cabinet confirmed changes to income tax rates. The first tax band (for earnings up to €38,441) will now be taxed at 35.82%, down from 36.97%. Income between €38,441 and €76,816 will be taxed at 37.48%, while earnings above €76,816 remain taxed at 49.50%.

• The changes are expected to save individuals up to €445 annually, although this will be partially offset by a reduction in the general tax credit of up to €335.

• Expat Tax Break Reduction:

• The tax-free allowance for expats will be reduced. Currently, expats can keep 30% of their earnings tax-free for five years, but this will drop to 27% starting in 2027.

• The minimum salary requirement to qualify for this expat tax scheme will also increase, from €46,107 to €50,436.

• Corporate Taxes:

• Companies buying back their own shares will continue to benefit from the dividend tax exemption.

• Deductions for corporate interest accrued will rise to 25%, aligning with European norms.

• Owners of over 5% of a company's shares will see their tax on dividends and profit distributions fall from 33% to 31%.

• Indirect Tax:

• From January 1, 2026: Standard VAT rate of 21% will apply for works of art, supply or lending of books, newspapers and magazines, practicing sports and visiting swimming pools, museums, concert halls, theater, sport matches attendance.

• Gambling Tax Increase:

• The tax on gambling winnings over €449 will increase to 34.2% in 2025, and will further rise to 37.8% in 2026.

• Box 3 Asset Tax Rate:

• The Box 3 tax rate, which applies to earnings from personal assets, will remain steady at 36%.

• Taxpayers who were overcharged on fictive gains can apply for compensation, with specific deadlines for different tax years.

Other Key Tax Revenue Projections:

• Direct taxes (wage and income tax, corporate tax) are expected to bring in €155.7 billion.

• Corporate tax revenue is projected to reach €46.6 billion.

• Dividend taxes should generate €6.6 billion, while inheritance and gift taxes will account for €3.6 billion.

• Indirect taxes (value-added tax, excise duties) will generate €121.6 billion, including €82.2 billion from VAT.

These tax changes are part of the Cabinet’s broader plan to maintain fiscal health while addressing various economic challenges, including housing, defense, and healthcare funding. The budget reflects a mix of tax relief and increased contributions in specific sectors to balance the country’s financial needs.

SOURCE/ RECOMMENDED READ: 

• How the Dutch Cabinet's 2025 budget affects your wallet; Deficit of €31.9 billion likely | NL Times

• Prinsjesdag - Budget Day in the Netherlands | KVK

• Prinsjesdag 2024 - Budget Day in the Netherlands | Business.gov.nl