Social Dutch budget will be tougher for entrepreneurs

Small businesses and entrepreneurs will foot the bill for a 2023 budget aimed at helping the poorest in society who are struggling to make ends meet.

The Dutch government’s spending plans for 2023 were announced on “Prinsjesdag”, the third Tuesday in September, in The Hague with a sober message from the Dutch king.

Increasing spending power is the plan’s main goal, with handouts worth €17.2 billion to support “vulnerable groups and people in middle incomes”.

This means a small decrease in the first income tax bracket (from 37.07% this year to 36.93%) and a slight increase in this bracket from €69,398 to €73,071. The minimum wage will be raised by 10%, the employee allowance will be increased slightly and social benefits will be increased. Energy prices are capped for average household consumption and an emergency fund ensures no one is disconnected from the grid for non-payment.

small business

But the donations, which are intended to benefit workers in particular, are largely funded by wealthier individuals and companies, particularly small and medium-sized businesses and entrepreneurs.

“It’s a tough budget for businesses,” says one Blue Umbrella expert. “There are some good things. We’re in a recession, so we need to help people who are struggling to buy groceries each week. But someone has to pay.”

Box 2, a tax levied on people with more than 5% of wealth in a company, will have two tiers from next year and the top tax rate will increase. Dividend gains of up to €67,000 are taxed at 24.5%, above that the tax rate rises to 31% (from the current flat rate of 26.9%).

Various tax benefits will be removed, including the ability to calculate taxable income over three years, save money for your retirement in your company (FOR) and the current ability for start-ups to pay their owner-CEO less than the minimum required by law to count. A new, simpler rule to cover 96% of childcare costs for young children will be funded through the elimination of a tax credit for families with two working parents (IACK).

freelancer

“Several measures are proposed that will strike a better balance between the tax burden on work and the tax burden on wealth,” the government says. “The aim is to reduce the discrepancy between the tax burden on employees and entrepreneurs that has arisen in recent years.”

This means that a tax allowance for freelancers, which is intended to compensate for missing holiday pay and short-term health insurance, for example, will be reduced more quickly and will be set at EUR 5,030 in 2023 and EUR 900 in 2027.

Meanwhile, rules are being tightened on the amount directors-major shareholders must pay themselves as taxable salaries – a measure expected to generate €5 billion.

box 3

Box 3, where savings and assets are taxed, will be amended to reflect actual income rather than ‘fictitious’ allocations – which a recent court case has ruled illegal. Savings up to €57,000 are tax free and additional savings are subject to a 34% tax at 0.01% of the deemed profit. However, the tax on investments and wealth is 5.53%.

“For large companies, you can usually make a preliminary decision with the Dutch tax office, but this will mainly affect small and medium-sized businesses such as bakeries and local businesses,” says the Blue Umbrella expert. “They have to bear higher salaries, higher prices and more taxes. Some of them may close.

“Some international entrepreneurs may disappear and return home. There could be even more unemployment. People will have a hard time. The question is: Who pays the bill?’

Contact us for advice on how Budget 2023 will affect you blue umbrella