Measures for individuals - 2021 Tax Plan

28 september 2020 | Door:  Matthijs van Dorssen

Taxes on wealth will be slightly lowered because of a higher exemption. The way wealth is taxed, will not be changed. Announced is that first-time buyers and young people will no longer have to pay transfer taxes when buying a house.

Adjustment of rate in box 3

To help smaller savers and investors, the legislative proposal relating to the ‘Adjustment of box 3 Act’ proposes a change to the tax on imputed return on investment in box 3.

The system used to determine returns will not change in 2021. The tax payable will therefore continue to be calculated on the basis of three bands. However, the tax-free allowance per person will be increased from € 30,846 in 2020 to € 50,000 in 2021.

In 2021 the bands will be as follows: 

• Band 1 will run from € 50,000 to € 100,000 (2020: € 30,849 to € 103,643).
• Band 2 will run from € 100,000 to € 1,000,000 (2020: € 103,643 to € 1,036,418).
• Band 3 will start from € 1,000,000 (2020: from € 1,036,418).

The rate in box 3 will increase to 31% (currently 30%).

Please note:
The increase in the tax allowance will not affect your entitlement to allowances, such as care allowance, housing allowance or the child-based budget. An asset threshold of € 31,430 (2021) will apply to these allowances.

Increase in transfer tax on residential properties that are rented out and non-residential properties

At present, transfer tax is charged at a rate of 2% on residential properties and 6% on non-residential properties. In the case of non-residential properties, such as commercial buildings and business premises, this tax was due to rise to 7% from 1 January 2021. This change will not come into effect.

Instead, the general rate will be increased to 8% from 2021. This rate applies to purchases of non-residential properties, such as commercial premises, as well as to purchases of residential properties that are not used as a main residence, e.g. houses that are rented out and holiday homes.

From 1 January 2021 the purchase of residential properties by non-natural persons (e.g. companies, housing associations, etc.) will therefore always be subject to transfer tax at a rate of 8%.

Tip:
Do you want to invest in property and would you like to take advantage of the lower rate of transfer tax while this still applies? If so, the property must have been transferred to you by 31 December 2020!

Exemption from transfer tax for first-time buyers

From 1 January 2021 first-time buyers will no longer have to pay transfer tax when buying a home.  

The conditions that apply to this exemption are as follows:

• the buyer is aged between 18 and 35,
• the buyer will live in the purchased home him/herself and this will be his/her main residence,
• and he/she has not previously benefited from the exemption.

The buyer must declare in writing that he/she fulfils these conditions. This declaration is required by the notary for the transfer tax return.

If a couple buy a house together, e.g. on a 50/50 basis, it is necessary to assess for each buyer whether the exemption can be applied. It is therefore possible that one buyer will qualify for the exemption, while the other has to pay 2% transfer tax on his/her share in the property.

If you do not fulfil these conditions when buying a home, you will have to pay 2% transfer tax. You are only entitled to this lower rate if you will be living in the home yourself. Otherwise the new rate of 8% will apply.

Tip:
Are you aged between 18 and 35 and already have your own home, but want to buy a new home from 1 January 2021? If so, you still qualify for the exemption from transfer tax for first-time buyers, as you have not previously benefited from this exemption.

More human system for allowances to be put in place at Tax and Customs Administration

Numerous changes have already been made in response to the ‘childcare allowance affair’, such as appointing two state secretaries to oversee the Tax and Customs Administration and adopting a hardship scheme.

In the 2021 Tax Plan a proposal for an ‘Act to Improve the Administration of Allowances’ has been added to these. This Act should make it possible, in the short term, to implement a better, more human system and to increase citizens’ legal protection. The most notable measures set out in the legislative proposal are as follows:

• The all-or-nothing nature of childcare allowance has been abandoned. The Tax and Customs Administration will determine your entitlement to childcare allowance based on the proportion of the costs that you, as a parent, have paid to the childcare organisation on time. Previously, you had to pay back the entire allowance if you had not paid the full amount to the organisation on time.
• Under specific circumstances the Tax and Customs Administration will claim back a lower amount than that prescribed by law. This is only possible if reclaiming the full amount would be disproportionate.
• Partners are no longer partners for allowance purposes from the moment one of them is admitted to a nursing or care home.
• Interested parties can make their views known to the Tax and Customs Administration early in the process to avoid the need for subsequent objections and appeals.

Life-course savings scheme

Until 2012 employees had the option of saving for a life-course savings benefit. When the life-course savings scheme was abolished it was specified that employees with an entitlement under such a scheme exceeding € 3,000 on 31 December 2011 could make use of transitional arrangements. These transitional arrangements will end on 31 December 2021. This means that if the life-course savings benefit has not been paid out in the form of a wage by 1 January 2022, the value of the credit will be taxed.

The transitional arrangements have come up against practical problems and are therefore being amended as follows:

• The institution administering the life-course savings scheme will become the withholding agent for payroll tax at the fictitious moment of payment (the moment when it is assumed that the remaining life-course savings benefit is paid out).
• This fictitious moment of payment is being brought forward. If the benefit has not been paid out in the form of a wage by 1 November 2021, the fictitious moment of payment will be 1 November 2021.
• The institution will not take tax credits into account. These can be claimed by the employee in his/her income tax return. The tax credit for leave under the life-course savings scheme is one of these.

One-off rent reduction for tenants on low incomes

In spite of the fact that housing associations take the level of a person’s income into account when allocating housing, there are people who are paying rent that is too high for their income. From 1 January 2021 eligible tenants will therefore be able to request a one-off rent reduction from their housing association. You qualify for a rent reduction if you rent social housing from a housing association (not private sector) and satisfy the following conditions:

Your monthly rent exceeds:

• € 619.01 for a single- or two-person household.
• € 663.40 for a household of three persons or more.

Your annual income is no more than:

• € 23,225 gross per year for a single-person household.
• € 31,550 gross per year collectively for a multiple-person household.

Please note:
Your income for 2019 is taken as a basis to assess whether you are eligible for the rent reduction.