Budget Day 2024: measures for individuals

Introduction new tax bracket box 1

In box 1 of the income tax, a new bracket will be introduced. For non-AOW recipients, box 1 will have the following three brackets as of 2025: 8,17% for income 0 to 38.441 euros (first bracket); 37,48% for income € 38.441 to € 76.817 (second bracket) and 49,50% for income from € 76.817 (third bracket). For AOW recipients, the following brackets will apply from 2025: 8,17% for income € 0 to € 40.502 (first bracket); 37,48% for income € 40.502 to € 76.817 (second bracket) and 49,50% for income from € 76.817 (third bracket).

Adjustment threshold top rate box 1   

The threshold for applying the highest rate in box 1 of income tax (49.50%) is increased annually. For 2025, this increase amounts to € 1.299. In 2025 the top rate will apply to income starting from € 76.817. 

Box 2 tax rate reduction 

For substantial interest holders, the high rate (box 2 income tax) will be reduced from 33% (2024) to 31% (2025). This rate applies to regular benefits (such as dividend payments) and capital gains (such as profits from the sale of shares) above € 67,000 per taxpayer per year. The lower rate (up to 67,000 euros) will remain at 24.5%. 

Adjustment excessive borrowing and partnerships  

For directors-majority shareholders (dgas) who participate in a partnership, general partnership (VOF), or limited partnership (CV), it may occur that enhanced loans are counted twice under the rules regarding excessive borrowing. To prevent this double counting, this will be included in the legislation. This applies retroactively to January 1st, 2023 (effective date of the Excessive Borrowing Act).

Limitation of tax facilities for donations

In the coming years, the deduction for donations to non-profit organisations that qualify as a public benefit institution (ANBIs) will remain intact. However, for directors-majority shareholders (dgas) who donate from their own company, the donation will be regarded as a disguised dividend distribution that is subject to taxation in box 2. Furthermore, the deduction for donations to ANBI's will be sealed back in the corporate income tax.

Business succession schemes limited to ordinary shares 

As of 2026, the application of the business succession schemes in the gift and inheritance tax and income tax will be limited to ordinary shares. This means that a donor or testator (whether or not together with his partner) must hold ordinary shares in a company with an interest of at least 5% of the total issued capital. The business succession regulations do not apply to other interests, such as species shares, tracking stocks, options, profit-sharing certificates and membership rights in cooperatives. Preference shares continue to qualify if they are created as part of a phased business succession. Preference shares are defined as ‘shares with priority over profit distribution or profit sharing’. In the future the shares might qualify as preference shares more often.

Relaxation of ownership and continuation requirements in business succession scheme

The ownership and continuation requirements of the business succession scheme in the gift and inheritance tax will be relaxed as of 1 January 2026. Accordingly, it will be possible to make adjustments to the legal structure during the possession period (five years in the case of donation and one year in the case of death) and the continuation period (three years after donation or death) as long as the economic entitlement to the business does not change. The continuation period will be reduced from five years to three years starting in 2025. 

Unintended use of business succession schemes

Starting in 2026, several anti-abuse measures will be introduced to prevent unintended use of business succession schemes. In case of inheritance, the holding period will be gradually increased two years after reaching the state pension age (by six months for each year that passes). In case of gifts, the holding period will be gradually increased six years after reaching the state pension age (by six months for each year that passes). This aims to prevent investment assets (which are not covered by business succession schemes) from being converted into business assets (which are covered by such schemes) at an advanced age. Additionally, a measure will be introduced to prevent a business from being acquired multiple times under the business succession scheme. A successor can only apply the business succession scheme to the same business once.

Change effective date of extension of dilution regime and access for small family interests

The expansion of the dilution rule to interests of less than 0.5% and the expansion of the business succession rule to direct interests of less than 5%, provided there is a joint interest with the family of at least 25%, will not take effect on 1 January 2025. It is currently being assessed whether there is any unauthorized state aid. Should the European Commission conclude that no unauthorized state aid is involved, the extension will take effect at a time to be determined by royal decree.

Update box 3

The legislature has added a letter to the Budget Day documents regarding the status of the box 3 Restoration Act (the rebuttal scheme). This regulation is particularly intended for people who in (one of) the past or coming years have made a relatively low return on their box 3 assets. If these people can demonstrate that the actual return on their box 3 assets in a given year is lower than the deemed return (the flatrate), then in certain cases they are allowed to use the actual return achieved. The letter contains some guidelines to determine how the actual return should be calculated, following two Supreme Court rulings dated 6 June 2024 and 14 June 2024. 

In principle, the following groups of taxpayers can use the rebuttal scheme: 

• Tax years 2021 and later: all taxpayers; 
• Tax years 2019 and 2020: 
  • taxpayers whose final assessment were not yet irrevocably on December 21, 2021, or were received thereafter and; 
  • who have filed a request for ex officio reduction or will do so no later than the end of this year (for tax year 2019) or before the end of the next year (for tax year 2020); 
• Tax years 2017 and 2018:
  • taxpayers with a final assessment whose objection was included in the mass objection procedure or whose final assessment was received after the Christmas ruling and;
  • who have timely filed an ex officio reduction request no later than the end of 2022 (for the 2017 tax year) or before the end of 2023 (for the 2018 tax year).

According to the State Secretary, in order to demonstrate that the actual return on box 3 assets is lower than the deemed return, the following elements must be taken into account: 

• It concerns the return on the whole box 3 capital, i.e. all assets and debts together;
• with respect to debts, a threshold is not taken into account;
• Real estate in own use (such as a vacation home) has an economic rental value. The State Secretary assumes a rent that could have been obtained under normal circumstances.
• According to the Supreme Court, and therefore also according to the State Secretary, the WOZ value must be used for the valuation of the homes. The change in value is applied time-proportionally, which is relevant for real estate that is purchased or sold during the year.

Lowering of RETT rate for residential properties

The real estate transfer tax (RETT) rate for residential properties that do not serve as main residence will be reduced from 10.4% to 8% as of 1 January 2026. The rate for the acquisition of residential properties used as the main residence remains unchanged at 2%.

Extension of starter's exemption and reduced RETT rate

The application of the starter's exemption and the reduced rate for residential property serving as main residence (2%) in real estate transfer tax will be extended to economic property acquisitions. This could include, for example, the renewal of a leasehold right via an obligatory agreement in anticipation of the legal establishment of the leasehold right. It is not essential that legal ownership is also eventually acquired. 

Exception key agreement as acquisition of beneficial ownership for RETT purposes

A key agreement is an agreement whereby the buyer receives the key in advance of the legal acquisition of the property. Entering into a key agreement may currently constitute an acquisition of real estate for transfer tax purposes. This is a taxable event for transfer tax purposes. This will be abolished. Instead, transfer tax will then only be payable at the time of legal title acquisition. 

Increase gambling tax

The gambling tax rate will be increased from 30.5% to 34.2% in 2025 and 37.8% in 2026.