Increase in the low VAT rate approved

On 18 December, the Senate approved more than 60 tax measures for citizens and businesses. This means that tax rates will be lowered from next year onwards and tax credits (tax credits) will be increased, making work more rewarding.

The measures are part of the Tax Plan 2019 package. Many of the measures will take effect on 1 January 2019, as will a number of tax measures that have already been agreed on. Below you will find an overview of some of the most important tax changes for citizens.

Introduction of the two-disc system

The gradual introduction of a two-disc system with a basic and a top rate will increase disposable incomes for all persons with an income of € 21,000 or more per year. The rate in the current second and third bands will fall from 40.85% to 38.10% in 2019. The rate in the current first bracket will increase from 36.55% to 36.65%. The rate in the current fourth bracket will fall from 51.95% to 51.75%.

Increase of the general tax credit

By increasing the general tax credit, the disposable income of people with an income up to € 68,507 per year increases. In 2019, the tax credit will increase by € 212 to € 2477 for incomes to € 20,384 per year. Income between € 20,384 and € 68,507 will also benefit from the increase in the general tax credit, but to a lesser extent.

Labour discount

An increase in the labour discount will increase wages. The maximum labour discount will increase by € 150 to € 3399 in 2019. In addition, the labour discount will decrease more quickly in 2019. Employees with an income between approximately € 10,000 and € 41,000 will benefit from this.

Older people discount

The purchasing power of pensioners will be strengthened in 2019 by an increase in the discount for the elderly. In 2019, the maximum amount of the senior citizens' discount after indexation will be increased by € 178 to € 1,596. For older people with an income above € 36,000, the old-age discount will gradually decrease from this year. Elderly people with an income between € 36,000 and € 47,000 will benefit from this, because in 2018 the reduction for the elderly will still fall directly to € 72 if the income exceeds the income threshold.

IACK

Employees who combine work with the care of young children are entitled to the income-related combination discount (IACK). This discount will be calculated differently in 2019. People with an income between € 5000 and € 25,000 can expect less IACK, because the basic amount of €1,000 disappears. However, the accrual percentage used to calculate how much IACK you are entitled to will increase from 6.16% to 11.45%. As a result, the maximum IACK (€ 2835 in 2019) is already reached at a lower income.

Groceries

The government is partly paying for the reduction in labour costs by increasing taxes that are less disruptive to the economy. For example, an increase in the low VAT rate from 6% to 9% will make shopping slightly more expensive. In practice, this means that groceries with a value of € 100 will become € 2.83 more expensive in 2019.

Own home

Deductions are costs that people are allowed to deduct from their income, so they pay less income tax. For the higher incomes (income above € 68,507) the rate of a number of deductions is reduced, such as the mortgage interest deduction. In 2019, the rate for mortgage interest deduction for high incomes will be 49%. At the same time, the fixed rate for owner-occupied dwellings will fall to 0.65%. This is a percentage of the WOZ value of the home on which tax must be paid.

With effect from 1 January 2019, the deduction due to no or small owner-occupied home debt (the Hillen Act) will be limited. The deduction is reduced by 3 1/3 percentage points annually over a period of 30 years.

Volunteers

Volunteers can get up to € 200 more tax-free per year, up to € 1700 per year. In addition, the hourly rate used by the Tax and Customs Administration to assess whether volunteering is involved is increased to € 5.

Greening

What is more polluting for the environment is more heavily taxed: the tax on natural gas is increased, that on electricity is reduced. Landlords who convert rented homes energy-efficient will be eligible for a tax reduction from next year.

Increase in tobacco tax

Cigarettes, smoking tobacco and cigars are becoming more expensive. For example, a packet of 20 cigarettes becomes 6 cents more expensive (excise + VAT) and a packet of 40 grams of shag becomes 11 cents more expensive (excise + VAT).