The new Dutch government plans to reform the tax system

The new Dutch government plans to introduce a new tax system in 2019 if the Dutch tax office (Belastingdienst) can handle it.

The current tax system of the Netherlands

There are currently 4 tax groups in the Dutch tax system and the percentage of tax you pay depends on your annual income. If you have an annual income of up to € 19,981, then you fall into the first tax group and will pay 36.55 percent in tax. The next group concerns those who earn 19,982 euros to 33,790 euros. In this case, the tax applied is 40.8 percent. In group three, a tax of 40.8 percent applies to income up to € 67,071. Those who earn above € 67.071 fall under the latter tax group and pay 52% of their salary to the Dutch tax office. Many expats in the Netherlands are subject to a slightly different tax rule, namely the 30% rule. However, in order to take advantage of this regulation, you must meet certain requirements.

Proposed Dutch tax system

The Dutch government wants to move to a system with two tax bands instead of four. In the proposed tax system, the first three tax groups will be merged into one, those who earn up to 68 euros will be taxed 000 percent. Those earning above this amount will be taxed at 37 percent. The new system is especially beneficial for those with low and middle incomes, as those with average incomes can profit from lower tax rates. Employers also see an advantage of the proposed system, as employees with higher incomes are less likely to ask for a raise.

Implementation of a system with two groups

To implement such a tax system, the Dutch government is looking at a value added tax (BTW) increase to cover a net tax cut of five billion euros. This will mean higher food prices and electricity bills. Other measures, such as cutting tax deductions on mortgages in the Netherlands, remain to be discussed.