Budget day 2020: what are the most important measures proposed for individuals and entrepreneurs?

25 September 2020

Budget day is an annual event which gets a lot of attention in our business, certainly now that so many sectors have been hard hit by the corona crisis. We have briefly summarized a few highlights for individuals and entrepreneurs, so that you know where you stand and may be able to take advantage of some of them. The Cabinet’s plans still have to be guided through both Chambers, of course, but the trend is clear.

Budget Day 2020

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What are the most important measures proposed for individuals?

The property transfer tax exemption for first buyers is one of the most remarkable measures proposed for individuals. Apart from that, there are also some changes in (income) tax rates, deductions and credits. We have outlined the most important measures below.

· The income tax rates for 2021 are to change again. The basic rate has been cut from 37.35% to 37.10% (for pensioners: from 19.45% to 19.20%). The top rate remains 49.5% on an income of more than €68,507.

· The box 2 rate has been further raised from 26.25% to 26.9%.

· With regard to box 3 the tax-free allowance on assets will increase from €30,846 to €50,000 (for tax partners this amount will be €100,000). In addition, the band threshold will be raised slightly, with the second band starting from box 3 assets of €100,000 and the third band from box 3 assets of €1,000,000. The rate at which box 3 tax will be payable will increase from 30% to 31%.

· The employed person's tax credit will increase in 2021.

· The maximum percentage for the mortgage deduction will further decrease to 43%.

· Until 2025 first-time buyers will not have to pay any property transfer tax when buying a home. At first sight, a thoughtful gesture towards first-time buyers on the housing market, but one which is unlikely to provide any long-term solution to the demand for more affordable housing.

· People who buy properties that they do not intend to live in themselves on a permanent basis will be faced with a rate increase of 2% to 8%

What are most important measures proposed for entrepreneurs?

In addition to the proposed changes in (income) tax rates, entrepreneurs can expect a further decrease in the tax benefits (i.e. ‘ondernemersaftrek’) for self-employed persons in 2021. We have outlined the most important proposed measures below.

· The self-employed deduction, which is now €7,030, will be rapidly cut until it reaches only €3,240 in 2036. The self-employed deduction in 2021 will amount to €6,670.

· Certain items will still be deductible in 2021 but only at 43%, for example, business owner’s allowance, SME profit exemption and the business use exemption.

· The rate for the purchase of commercial property will rise from 6% to 8%.

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If you have any questions about the approaching challenges or opportunities, you are welcome to contact us. We hope you enjoyed reading our newsletter!