Last Tuesday was the third Tuesday of September and that means Prince's Day! This year it was a Budget Day in special times. This is because the Rutte IV government is outgoing and for that reason is not allowed to announce grand plans and throw money around. Also, government finances are coming under increasing pressure and most political parties are already gearing up for the Lower House elections in November. In Hague terms: a "policy-poor" budget without too many major decisions. On this page an overview of the most relevant plans and measures.

1. SME profit exemption further reduced

The SME profit exemption will be reduced from 14% to 12.7% as of Jan. 1, 2024. The SME profit exemption is a scheme that reduces taxable profits after the entrepreneurial deduction. Entrepreneurs who make use of this scheme will thereby start paying taxes on a larger portion of their profit or income. Entrepreneurs with the highest profits lose the most financially.

2. Reduction in self-employment deduction continues

Since 2020, the self-employed deduction has been reduced in steps. In 2024, the deduction will be reduced by an amount of €1280. The self-employed deduction will then come to an amount of €3750. Until 2027, this reduction continues to an amount of €900. This fits into the broader policy of the government to create a more level playing field between employees and the self-employed.

3. Increase in untaxed travel reimbursement

The untaxed mileage allowance goes up from €0.21 to €0.23 in 2024. As an entrepreneur, you may deduct this amount from the profit for business trips with a private car, motorcycle or bicycle. As an employer, you may also give your staff a tax-free reimbursement of €0.23 per kilometer. This applies to commuting and other business travel by private vehicle.

4. Austerity of Energy Investment Deduction

If you invest in energy-saving measures and sustainable business assets, you may be eligible for the Energy Investment Allowance (EIA). A percentage of the costs of that investment can then be deducted from the profit. As a result, less tax is paid. The EIA for entrepreneurs will be extended until 2028. The percentage that may be deducted does drop from 45.5% to 40% in 2024. The investment is minimum €2500 and maximum €136 million. So it may be wise to make another large investment in 2023 to take advantage of the 45.5% rate.

5. Box 1 income from employment, benefits or home ownership

Your income in box 1 is taxed in two brackets. In 2024, you will pay 36.97% tax on your income up to 75,624 euros. That is 0.04 percentage points more than in 2023. On your income above 75,624 euros you will pay 49.5% income tax next year, the same as in 2023. The amount of the bracket limits went up other years by the rate of inflation. This year, the increase is 3.55%. That's less than the inflation rate of 9.9%. You're more likely to pay the higher rate of the second bracket because of this.

6. Box 2 stock ownership income

If you own 5% or more of the shares in a company, you have a "substantial interest. You may then receive profit distributions, also called dividends. In 2023, you paid 26.9% tax on this. In 2024, dividends received from substantial interest will be taxed in a two-tier system. On income up to 67,000 euros, you pay 24.5% tax. On everything above that, the rate is 31%.

In 2024, you pay less tax in Box 2 on profit distributions up to about €106,000. On higher profit distributions, you will pay more tax in 2024 than in 2023. So it may be interesting for you to distribute accumulated profits in the company still in 2023. It may be interesting for you to distribute accumulated profits in your company still in 2023. Consult with your advisor. Note: After a dividend distribution, you have money and investments in private. It is then capital in box 3. There is a tax-free capital of 57,000 euros in box 3. If the value exceeds this exemption, you pay tax on this in box 3.

7. Income-related health insurance law contribution

As an employer, you pay an employer healthcare insurance law levy on employees' wages. In 2024, this contribution is 6.57% over a maximum of €71,624. In 2023, the contribution was still 6.68% over a maximum of €65,952. This income-related healthcare insurance law contribution is part of the payroll tax.

On the entrepreneurial income, you pay the income-related health insurance law contribution yourself. For this, a rate of 5.32% on the maximum contribution income of €71,624 applies in 2024. The rate in 2023 was 5.43%. You will receive the (provisional) assessment for the income-related healthcare insurance act contribution at the same time as the (provisional) tax assessment.

8. Further develop legislation and strengthen enforcement

Officials at the Ministry of Social Affairs and Employment continue to work on the bill to have a clearer distinction between self-employed workers and employees. This bill covers the criteria of "authority," "embedding," and "self-employment. It is expected that within now and a few weeks the draft bill will be published through an Internet consultation. The Tax Administration will also continue to work towards lifting the enforcement moratorium in order to improve the enforcement on false self-employment.

Finally, work continues on the legal presumption of employment below a certain hourly rate (between €30 and €35 per hour). Should a worker earn less than this hourly rate, there is a legal presumption of employment. It is then up to the worker to prove that this is not the case.