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Netherlands To Reduce Tax On Savings Income

Friday, September 13, 2019

On September 6, 2019, the Dutch Ministry of Finance announced proposals to reforms the tax rules for savings income.

Under current rules, savings income is grouped together with income from investments in box 3 of the income tax return.

At present, tax applies at a rate of 30 percent on the deemed return from savings and investments. Tax applies if an individual has assets in excess of EUR30,360 (USD33,465), or EUR60,720 for joint filers.

The rules provide that as a taxpayer's savings and investments increase, more should be attributed to investment activity, which is deemed to generate a greater return for the taxpayer. This is regardless of whether the taxpayer in fact has only savings. Consequently, a higher rate of return is assigned to those with more assets and more tax applies.

Under the reforms, a distinction will be made under tax law between savings and investments. Savings income will be given a lower rate of return for tax purposes, compared with investments, significantly reducing the tax burden for taxpayers with significant savings.

According to the Finance Ministry, almost 500,000 taxpayers will pay less tax, while an estimated 1.35m taxpayers are expected to pay no tax on savings income.

The Finance Ministry said that the Government intends to work further on the detail of the proposals with a view to introducing legislation in parliament before the summer of 2020. It is intended that the reforms will become effective on January 1, 2022.