Income tax and tax credits

In September, the Dutch government announced it would introduce new taxation measures in 2020. The most important change may be that the number of tax brackets will be reduced from the current four to just two. Under the new rates, an annual income of up to €68,507 will be taxed entirely at 37.35%, and any income over that will be taxed at 49.5%. While it will obviously vary per individual, the government believes that the majority of employed people will see a reduction in the income tax they pay.

At the same time, work and general tax credits are being increased. You need not apply for credits, so you may notice the benefits in your pocket without having to take any action. View some indicative examples here.

If you are self-employed, your annual tax break will be reduced to €7,030 per year. In 2019, this was €7,280. The Dutch government is slowly reducing this to €5,000 in 2028. It is believed that with all taxation changes taken into account, a tangible difference isn’t likely to be felt in 2020.

As is common every year, the salary thresholds to qualify for a highly skilled migrant procedure and the 30% tax ruling will be updated on 1 January. These changes will be announced soon.

Family & kids

In 2020, more families are expected to be entitled to receive a child budget or will receive higher child benefits. Later in the year, as of 1 July 2020, new fathers will be able to take five weeks of extra parental leave (paid at 70% of their salary), on top of one week of full paid leave.

Housing

Homeowners may receive a slightly lower tax break from the amount of interest paid on their mortgage (hypotheekaftrek). For the highest tax bracket, this is being reduced by 3% every year until 2023. However, in 2020, this change will mainly be offset by reductions in homeowners’ tax.

For the past two years, energy bills have increased substantially due to rising prices and an increase in tax and VAT. However, in 2020, it is expected that a reduction in tax could see the average family save around €100. Of course, the actual impact of this tax cut will vary by household.

Changes specific to the City of Amsterdam

The City of Amsterdam is also introducing some changes to policies and tax that are worth noting. For example, the City is working to make housing more accessible to young people who’ve grown up in the city, middle-income earners, and those working in healthcare or education. There are also changes to room rentals, meaning more house owners will require permits to let out individual rooms, while the criteria for obtaining these permits will become stricter. The current rules for holiday rentals will remain in place for 2020, but keep in mind that B&B permits come into effect as of 1 January. This may impact anyone using holiday rental websites to let only a single room in their home. And as of 1 January, the City’s Housing Regulations will also apply to houseboats.