The Dutch Second Chamber has recently adopted the Act implementing the majority of the fiscal measures contained in the country’s 2013 Budget Agreement (UFM), concluded on May 25.
In accordance with the law, the general value-added tax (VAT) rate is to rise by 2% from October 1 to 21%. A transitional provision will apply to new homes purchased before April 28, 2012, with a completion date set for after September 30, meaning that the existing 19% VAT rate will apply up until October 1, 2013.
Of the EUR4bn (USD5bn) in fiscal revenues expected from the VAT increase, EUR1.5bn will be used next year to strengthen the purchasing power of low-income households in the Netherlands.
In 2014 and 2015, the product of the VAT rise will facilitate a ‘tax shift’, as it will gradually be channelled back into the country’s income and payroll tax system. The tax shift is expected to have long-term positive effects on employment and growth, and to ensure a less disruptive, more robust tax system, as set out in the tax agenda of the Dutch Secretary of State for Finance Frans Weekers.
The UFM law also provides for a permanent reduction in the country’s real estate transfer tax, for a so-called “green package”, for a rise in alcohol and tobacco duties and for a reduction to 6% in the VAT rate benefiting the arts.
According to the Dutch finance ministry, the UFM bill has a structural budgetary revenue of almost EUR5bn, ensuring an important contribution to sustainable public finances.
The remaining tax initiatives contained in the 2013 Budget Agreement, including plans to double the bank tax, will be provided for within the framework of other bills.
Agreed by a group of parliamentary parties on May 25, following the collapse of Mark Rutte’s minority coalition government, the 2013 Budget Agreement contains measures totalling around EUR12.4bn in 2013.
The agreement, which aims to reduce the budget deficit to 3% of gross domestic product in 2013, contains plans to modernize the labour market and to accelerate the rise in the retirement age, to be achieved progressively from 2013..
TAGS: tax | law | retirement | budget | tax rates | value added tax (VAT) | individual income tax | Netherlands | payroll
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