What to Expect: Key Tax Updates and Changes for 2025
After spending quality time with loved ones during the 2024 holiday season, it’s time to look ahead to the changes coming in 2025. To help you prepare, we’ve created a detailed overview of the tax updates you can expect in the new year.
While many are starting to focus on their 2024 tax filings, which begin in March 2025, this article zooms out to the broader changes taking effect in 2025. By planning ahead, you’ll be better equipped to navigate the new tax landscape.
Income Tax and Allowances
We start, of course, with the changes to the income tax brackets and rates, as these impact the largest portion of the population in the Netherlands.
Adjustment of Income Tax Brackets and Rates (Box 1)
In 2025, income tax brackets and rates will see some notable adjustments. The income threshold for the top tax rate will increase beyond its usual annual indexation. Additionally, the rate in the first tax bracket will decrease, easing the financial burden on low- and middle-income earners. These changes effectively introduce a new additional tax bracket:
| Tax Bracket | Threshold 2024 | Rate | Threshold | 2025 Rate |
|---|---|---|---|---|
| Bracket 1 | Up to €38,098 | 36.97% | Up to €38,441 | 35.82% |
| Bracket 2 | Up to €75,518 | 36.97% | Up to €76,817 | 37.48% |
| Bracket 3 | Over €75,518 | 49.50% | Over €76,817 | 49.50% |
Something to note here is that while these adjustments might appear for many as a small tax relief, the reality for middle-income earners is more nuanced. As highlighted in an article by Jan Donders and Flip de Kam in Het Financieele Dagblad (FD), the “Dutch Financial Times,” the marginal tax burden for middle-income workers (with a taxable income between €43,000 and €75,000) will slightly increase in 2025.
The authors explain that marginal tax rates for this group will rise from 50.11% in 2024 to 50.327% in 2025. This increase is largely due to the reduction in income-based tax credits, such as the general tax credit and labor tax credit (see in the following point). These credits decrease as taxable income rises, effectively increasing the marginal tax burden. According to Donders and de Kam, this change reflects broader political challenges in reforming the complex tax system. While the government has promised tax relief, middle-income earners may be disappointed to find they keep slightly less from each additional euro earned in 2025 compared to 2024. The authors argue for a more transparent and simplified tax structure to address these systemic issues.
General Tax Credit Reduction (Algemene heffingskorting in Dutch)
As stated in the previous point, some of the income-based tax credits will decrease. In other words, the more you earn (the taxable wage increases) the less you benefit from the tax credit.
The maximum general tax credit will decrease from €3,362 in 2024 to €3,068 in 2025. This means that taxpayers earning at or near the statutory minimum wage will receive less tax relief compared to the previous year.
A significant shift in 2025 is that the general tax credit will no longer be tied solely to income from work and home (Box 1). Instead, it will be calculated based on total taxable income, which includes income from substantial interest (Box 2) and savings/investments (Box 3).
The reduction threshold for the general tax credit will also increase, beginning at an income of €28,406 in 2025 (up from €24,814 in 2024), aligning with the statutory minimum wage. Furthermore, the reduction rate rises to 6.337% in 2025, meaning that the general tax credit phases out more quickly as income increases.
In summary, while lower-income earners will still benefit from the maximum general tax credit, middle- and higher-income taxpayers will experience a faster reduction, ultimately receiving less relief compared to 2024.
Employment tax credit (Arbeidskorting in Dutch)
If you earn wages, profits from a business, or income from other work, you are entitled to the arbeidskorting. The amount of this tax credit depends on your total income.
In 2025, the maximum arbeidskorting will increase to €5,599, compared to €5,532 in 2024. This change particularly benefits those earning near the statutory minimum wage. For incomes between the minimum wage and approximately €40,000, workers will see a financial advantage.
However, for those earning more, the arbeidskorting will decrease once income exceeds €43,071 (up from €39,957 in 2024). The phase-out rate remains unchanged at 6.51%.These adjustments are designed to encourage employment but also underscore the challenges faced by middle-income earners, who often experience a higher marginal tax burden as their incomes rise due to the gradual reduction of tax credits.
Maximum Deduction Rate Adjustment for Box 1
The changes to the tax rates in Box 1 for 2025 will also impact the maximum deduction percentage for several key tax deductions, including:
- Mortgage interest deduction (hypotheekrenteaftrek)
- Entrepreneurial deductions (ondernemersaftrek)
- SME profit exemption (MKB-winstvrijstelling)
- Deduction for making assets available (terbeschikkingstellingsvrijstelling)
- Personal deductions (persoonsgebonden aftrek)
In 2025, taxpayers with income in the second and third tax brackets of Box 1 will be able to apply these deductions at a maximum rate of 37.48%, which corresponds to the second tax bracket rate. This represents a slight increase from the 36.97% maximum deduction rate in 2024.
These adjustments ensure alignment between deduction rates and the applicable tax rates in Box 1, offering a modest benefit to eligible taxpayers compared to the previous year.
Business Deductions and Entrepreneurial Allowances in 2025
SME Profit Exemption (MKB-winstvrijstelling)
In 2025, the SME profit exemption will decrease from 13.31% in 2024 to 12.7%. This reduction will slightly increase the taxable income for small and medium-sized enterprises, potentially impacting their overall tax burden in a negative way.
Self-Employment Deduction (Zelfstandigenaftrek)
The self-employment deduction continues its phased reduction, dropping from €3,750 in 2024 to €2,470 in 2025. This deduction will be gradually reduced further in the coming years, reaching €900 by 2027.
These adjustments are part of ongoing efforts to streamline tax benefits for entrepreneurs, though they may place additional pressure on smaller businesses and self-employed individuals who have historically relied on these deductions to lower their taxable income.
Introduction of the Wet DBA for Freelancers in 2025
The Wet Deregulering Beoordeling Arbeidsrelaties (DBA), a law governing the relationship between freelancers and their clients, has come into effect in 2025. This legislation aims to clarify when a freelancer is genuinely self-employed versus when they should be classified as an employee for tax and labor law purposes.
We briefly discussed this topic in our End-of-Year Tax Tips for 2024 If you’re a freelancer or work with freelancers, it’s crucial to understand the implications of this law.
For more in-depth insights, you can consult the White Paper by We Know People, which explores this topic extensively (available in Dutch). Additionally, you can revisit the webinar we co-hosted with We Know People, where we shared practical advice on navigating this upcoming change.
If you have any questions on this, please reach out to us and we will assist you!
Non-Deductibility of Costs for Non-Independent Workspaces in a Home
Starting in 2025, costs related to a non-independent workspace in a home that forms part of the business assets will no longer be deductible if those costs would typically be borne by the tenant in a rental situation.
Examples of such non-deductible expenses include:
- Furnishing costs
- Utilities such as gas, water, and electricity
This change clarifies the tax treatment of workspaces that are not entirely separate from the home, ensuring that only costs directly attributable to independent business premises remain eligible for deduction.
Property and Donations
Unchanged Rules for Homeownership
The way the mortgage interest deduction and the imputed income (eigenwoningforfait) works for owner-occupied properties will remain unchanged in 2025. There will be a slight adjustment in the deduction percentage for individuals falling into the newly created tax bracket in Box 1 (as discussed earlier). This change will allow those in the second tax bracket to benefit from a deduction rate of 37.48%, up from 36.97% in 2024. Additionally, new percentages on how to calculate the imputed income (eigenwoningforfait) will be applicable from 2025 (https://www.belastingdienst.nl/wps/wcm/connect/nl/koopwoning/content/hoe-werkt-eigenwoningforfait ).
At the same time, municipalities are considering ways to address rising local property taxes (OZB). Efforts are underway to explore mechanisms for capping these increases, helping to manage the financial burden on property owners.
Donations
- No Changes to Charitable Donations: The deduction for both one-time and periodic donations remains intact. Planned changes to harmonize thresholds, caps, and rates will not be implemented.
- Abolition of Corporate Donation Exemptions: The government initially proposed abolishing the corporate donation deduction in the 2025 Tax Plan. However, an amendment by the House of Representatives ensures the deduction will be retained in corporate income tax, albeit with new requirements. For more details, see the Corporate Income Tax section (further below).
- Increased Deduction Cap for Periodic Donations: The maximum deductible amount will rise from €250,000 to €1,500,000 as of January 1, 2025.
Box 2 and Box 3 Changes
Box 2: Substantial Interest — if you hold 5% or more in the shares of a company (foreign or Dutch)
In 2025, there will be slight changes to the tax rates on income derived from majority shareholding (Box 2 income), offering some relief for taxpayers in this category.
- The top tax rate will decrease from 33% in 2024 to 31% in 2025.
- The tax brackets themselves remain unchanged, with the threshold between the two brackets staying at €67,804.
| Tax Bracket | 2024 | 2025 |
|---|---|---|
| Bracket 1 | 24.5% Up to €67,804 | 24.5% Up to €67,804 |
| Bracket 2 | 33% From €67,804 | 31% From €67,804 |
Box 3: Wealth Tax in 2025
Last year, we published an extensive article detailing the changes in Box 3, which you can revisit here: https://www.dutchtaxadvice.nl/the-dutch-box-3-wealth-tax-and-recent-developments/. As 2025 has started, several updates and clarifications to the wealth tax system deserve attention, particularly regarding the calculation of actual returns. The form for calculation of the actual return on investment is expected this summer.
No Reduction in Box 3 Tax Rate
Although the coalition agreement suggested a reduction in the Box 3 tax rate, the 2025 Tax Plan includes no confirmation of this change. As a result, the Box 3 rate remains at 36% in 2025.
Counter-Evidence Rule for Actual Returns
Starting mid-2025 (most likely end of June, beginning of July), taxpayers can declare their actual returns on investments and savings via the new form “Opgaaf Werkelijk Rendement.” Information letters were already sent to eligible taxpayers between mid-October and mid-November 2024. This form is a key step toward addressing discrepancies in wealth taxation.
Expanded Eligibility for Box 3 Restitution
In response to the June rulings of the Supreme Court, the government will propose legislation in early 2025 for additional restitution under Box 3. This expanded eligibility includes taxpayers whose assessments were finalized by June 6, 2024, but not by December 24, 2021. The filing of the new form “Opgaaf Werkelijk Rendement” will also be considered a request for restitution.
Changes in Property Valuation
The Supreme Court has mandated that property valuations in Box 3 must align with WOZ values. For properties sold mid-year, the value changes will now be evenly distributed between the seller and buyer. For example, a property sold on July 1 will have its annual value increase split equally.
Use of Private Residences
The government views the private use of real estate as part of the actual return for Box 3 calculations. The Supreme Court is expected to provide further clarity on this issue later this year, and the “Opgaaf Werkelijk Rendement” form may be updated accordingly.
Prevention of Double Taxation
New guidelines ensure that when actual returns are used for Box 3 calculations, any double taxation on foreign income is avoided. The proportion of foreign returns will be considered relative to total returns when calculating tax relief.
Debt Threshold Application in Box 3
The debt threshold for Box 3 remains at €3,700 in 2024 and 2025. However, when calculating actual returns, the debt threshold will be disregarded for practical reasons, allowing taxpayers to deduct the full interest on all Box 3 debts.
Allowances and Deductions
- Child Budget Increase: The maximum amount and phase-out rate will increase annually from 2025 to 2028.
- Medical Travel Costs: Starting in 2025, the rules for deducting travel and transportation costs related to healthcare will be simplified, offering clearer guidelines for taxpayers:
- Healthcare Travel Costs (Zorgkilometers): Travel for medical treatments, picking up medications, or similar purposes will be deductible at a rate of €0.23 per kilometer. Additionally, actual expenses for parking, tolls, and ferry fees can also be deducted.
- Visits to Long-Term Care Patients: Travel costs incurred when regularly visiting long-term care patients remain deductible. However, the deduction will now apply from the start of care rather than from the onset of illness.
- Living Costs Due to Illness or Disability (Leefkilometers): Fixed deductions of €925 per year will be available for higher transportation expenses caused by illness or disability.
These changes aim to make it easier for taxpayers to claim deductions for necessary travel expenses while ensuring support for those with significant healthcare-related transportation needs.
Expats and Cross-Border Taxation
Partial Non-Resident Taxpayer Status Abolished
This regime will be abolished starting in 2025. However, expats who were already using the 30% ruling before 2024 can continue until 2026.
You can read our extensive article on the 30% ruling changes (including salary changes from 2025) and transitional rules here.
Cross-Border Taxation for Remote Work and Seafarers
Partial of full employment of a seafarer performed outside the Netherlands is deemed to have been performed in the Netherlands, insofar as the taxation rights over the wages for that employment — based on a tax treaty — are allocated to the Netherlands. This measure addresses a potential tax gap caused by a possible double exemption for seafarers.
Wage taxes
Clarification on Tax-Free Allowance for Public Transport Subscriptions
The government has clarified that if an employer allows employees to travel for personal use on a tax-free or discounted basis via public transport paid for by the employer, this benefit remains tax-free if it is also used for business travel to some extent. Additionally, the tax-free allowance will now apply to international public transport.
Reduction and Phase-Out of the Wage Cost Benefit for Older Workers (LKV Ouderen)
The wage cost benefit (LKV) for older workers has been reduced starting January 1, 2025, and will be completely phased out by January 1, 2026. However, this benefit will not be reduced or abolished for employment contracts that began before January 1, 2024.
Increase in Tax-Free Allowance Under the Work-Related Costs Scheme (WKR)
The tax-free allowance under the Work-Related Costs Scheme (WKR) will expand:
- From 1.92% to 2% on the first €400,000 of payroll starting January 1, 2025.
- From 2% to 2.16% starting January 1, 2027.
These adjustments provide additional flexibility for employers to offer tax-free benefits, particularly for smaller businesses with payrolls under €400,000.
Changes to VAT Rules in 2025 and 2026
Elimination of the Reduced VAT Rate for Certain Goods and Services (Effective 2026)
Starting January 1, 2026, the reduced VAT rate of 9% will no longer apply to categories such as:
- Lodging services
- Cultural goods and services
- Books
- Sports activities
These goods and services will be taxed at the general VAT rate of 21%. However, reduced rates will still apply to activities like camping, zoos, circuses, amusement parks, and cinemas.
The changes for culture, books, and sports are not yet finalized, as the government is working on alternatives to ensure the same budgetary outcome. These alternatives will be introduced through a separate legislative process.
VAT Increase for Lodging
The VAT increase for lodging services (e.g., hotels, pensions, and vacation rentals) remains in effect and will apply at the general rate of 21% starting January 1, 2026.
Transitional Rules
Temporary Suspension of Cultural and Sports Ticket VAT Increase:
Entrepreneurs selling tickets for events occurring in 2026 (e.g., sports matches or cultural performances) during the first half of 2025 will not need to charge the 21% VAT rate immediately. This temporary suspension gives businesses time to adjust to the new rules.
New VAT Rules for Digital Events
Starting January 1, 2025, VAT for digital events (e.g., online training sessions, virtual cultural events, or online sports classes) will be charged based on the customer’s location. The VAT rate will correspond to the country where the customer resides, is established, or usually resides.
Changes to the Small Business Scheme (Kleineondernemersregeling, KOR)
- Flexible Participation:
From January 1, 2025, the mandatory 3-year participation period for the KOR will be removed. Businesses can opt out at any time and reapply more quickly if needed. - EU-KOR:
A new EU Small Business Scheme (EU-KOR) will be introduced. Under this scheme, businesses operating in multiple EU countries can opt to charge no VAT to customers in other EU countries. However, no VAT prepayments can be deducted in those jurisdictions.
Real Estate Transfer Tax Changes in 2026
Introduction of a Specific General Residential Rate (8%)
Currently, the general transfer tax rate is 10.4%, with a reduced rate of 2% for homes that serve as a primary residence.
From 2026, a specific general residential rate of 8% will be introduced for properties that do not meet the primary residence requirement, such as vacation homes or second properties. The 10.4% rate will continue to apply to non-residential properties, such as commercial real estate.
Expansion of the Starter’s Exemption and Reduced Residential Rate
The conditions for the starter’s exemption and the reduced 2% rate for homes designated as primary residences will be expanded. These rules will now also apply to the acquisition of economic ownership (rather than just full legal ownership).
This change aims to provide more flexibility for individuals purchasing homes for their own use, potentially lowering barriers for homeownership under certain arrangements
You can read a bit more about this in one of our News articles here: https://www.dutchtaxadvice.nl/new-alert-new-rules-for-transfer-tax-whats-changing-in-2025/
This guide is to inform you about the tax changes for 2025 which we think might be relevant for you. If you have any questions or need assistance feel free to contact us. One of our experts will be more than happy to help and answer your questions!
Corporate Income Tax (Vennootschapsbelasting)
Qualification of Foreign Legal Forms
The qualification policy for foreign legal forms will be formally regulated by law, with several substantive changes. The qualification of foreign legal forms comparable to Dutch entities will continue to follow the legal form comparison method. However, for foreign legal forms that are not comparable to Dutch entities, two additional methods will be introduced: the symmetrical method and the fixed method.
Retention of Gift Deduction
The government proposed in the 2025 Tax Plan to abolish the deduction for corporate donations as of January 1, 2025. However, through an amendment, the House of Representatives has decided to retain the donation deduction in corporate income tax (up to 50% of profits, with a maximum of €100,000). Therefore, the donation deduction in corporate income tax will not be abolished.
Codification of ATAD GAAR in Corporate Income Tax
The General Anti-Abuse Rule (GAAR) from the Anti-Tax Avoidance Directive (ATAD1) will be codified in corporate income tax legislation. When ATAD1 was implemented in 2019, the Netherlands chose not to include GAAR in the legislation, as the concept of fraus legis already achieved the same objectives. Following input from the European Commission, the GAAR will now be formally enshrined in law. This change does not aim to introduce any material changes, including for other tax instruments.
Other Updates
International Transfer of Pension Capital
On November 16, 2023, the European Court of Justice issued two rulings regarding the conditions for the international transfer of Dutch pension capital. These rulings effectively make it easier to transfer Dutch pension capital abroad when accepting employment in another country.
Digital Platforms: Adjustment in Tax Data Exchange (DAC7)
Platform operators reporting to the Netherlands will now be required to provide additional information about sellers who are residents of a non-EU jurisdiction that exchanges information with the Netherlands on a reciprocal basis. This amendment addresses an omission in the current legislation.
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