Key tips for individuals

Gifts: profiting from (annual) exemptions and/or rates

Donating reduces your assets and allows you to take full advantage of exemptions and progressive gift rates for the inheritance and gift tax. Annually, you can donate up to 6,633 euros (2024) tax-free to your children. In all other cases, you can make an annual tax-free gift of 2,658 euros (2024).

For gifts from parents to children up to the age of 40, a one-time increased gift tax exemption of 31,813 euros (2024) applies under certain conditions.

If the donation exceeds the limits stated above, the excess is taxed. For excesses up to 152,368 euros (2024), the rate is set at 10% (gift to partner or child), 18% (gift to grandchild) or 30% (gift to others). If the donation exceeds the 152,368 euros threshold, the remaining amount will be taxed at a 20% (gift to partner or child), 36% (gift to grandchild) or 40% (gift to others) tax rate.

Donation via notarial deed of debt

By donating via a so-called notarial deed of debt (‘schuldigerkenning’), the liquidity burden can be limited. The donated amount is, as it were, immediately lent back from the recipient. With a donation via a notarial deed of debt, the donor is fiscally obliged to pay 6% interest to the recipient annually. This interest must actually be paid. A favorable effect is that the obligatory annual interest payment actually constitutes a gift tax-free asset transfer. Of course, the liquidity burden of the annual lifelong interest obligation as well as the pressure this can put (also in a later stage of life) on the donor's asset position must be taken into account.

The acknowledged amount of debt represents a claim for the person receiving it. In principle, this claim is only due upon the death of the donor. The amount of debt constitutes a debt in box 3 of the income tax for the donor and an asset in box 3 for the recipient. Currently, debts are subject to box 3 taxation at a lower flat rate than corresponding receivables (unless the actual return is lower). With this, box 3 neutrality at the family level is lost in principle. However, if potential savings on inheritance tax, the limited liquidity burden and the annual interest payment are taken into account, donating via notarial deed of debt out of generosity may still be an interesting option.

Interest payment due to donating via notarial deed of debt

When a donation is made via a notarial deed of debt, the donor is fiscally required to pay 6% interest to the recipient annually. In order to prevent the donor from retaining the enjoyment of the donation, the interest due must actually be paid. The end of the year is a suitable time to pay this gift interest.

Charitable donations

If you make a private donation to a non-profit organization (a public benefit organization - ‘ANBI’, or a support foundation for socially beneficial organizations - ‘SBBI’), you can under certain conditions apply the gift deduction in for personal income taxation purposes. A distinction is made between regular donations and periodic donations. Periodic donations must be established in writing for a period of at least five years and the deduction is limited to 250,000 euros per year. The deduction of ordinary donations is limited by a threshold and a ceiling that depends on your income. By donating to charities this year, you can save on personal income tax. Furthermore, if you make a donation to a cultural public benefit institution the tax deduction will consist of the amount of the donation increased by 25% (up to a maximum increase of 1,250 euros).

Charitable donations from own company

As of 2025, charitable donations from a company that do not serve any corporate interest will be regarded as a dividend distribution to the company's shareholder(s). This dividend distribution will be subject to taxation in box 2 of the personal income tax. It is therefore advisable to make any charitable donations from your company as late as 2024. The gift deduction in the corporate income tax will not expire in 2025. The corporate income tax gift deduction is limited to 50 per cent of the profit, with a maximum of 100,000 euros.

Optimizing box 3 position

Currently, there are two ways to determine the return on your assets for personal income tax purposes in box 3. Under the statutory tax regime, your income in box 3 is determined on a flat rate basis. However, the Dutch Supreme Court has ruled that your income in box 3 must be taxed based on upon your actual return if your actual return is lower than the flat rate return. From the summer of 2025, the Dutch Tax Authorities will publish a special form which can be utilized to demonstrate your actual return in box 3.

However, for the 2019 tax year, there is a point of attention: should your actual return in 2019 be lower than your flat rate return, you will still have to submit an ex officio reduction request to the Dutch Tax Authorities no later than this year (2024). Subsequently, in summer 2025, you will be able to prove your actual 2019 return using the special form as mentioned before.

You can still optimize your flat rate return for the 2025 tax year in 2024, because your assets on 1 January 2025 will determine your flat rate return for the whole 2025 tax year. For example, by investing in green investments (exempt in 2025 up to 26,000 euros per person; 52,000 euros for tax partners combined) or by making gifts or larger purchases in 2024, you will reduce your box 3 tax in 2025.

Reduction of highest box 2 rate

For personal income tax purposes, the highest box 2 tax rate will be reduced from 33% to 31% as of 2025. This rate applies to incomes of 67,000 euros or more in box 2 (134,000 euros for tax partners combined). The lower box 2 tax rate of 24.5% (for incomes in box 2 up to 67,000/134,000 euros) remains the same as in 2024. If you are considering paying dividends from your own company, it is important to take this tax rate change into account. Please keep in mind that dividend payments from 2025 may also affect the amount of your general tax credit.

Excessive borrowing from own company

Since 2023, excessive borrowing from your own company has been discouraged with the introduction of specific legislation. Substantial interest holders are required to pay (additional) income tax in box 2 if they have borrowed more than 500,000 euros (2023: 700,000 euros) from their own company on the reference date (31 December). Loans to related persons can also count towards this. The levy can be avoided by repaying debts to your own company before the end of this year. Reducing your debts may also be useful for your personal financial position.

Salary for directors-major shareholders

If you work for your own company, you are expected to receive a wage that is ‘customary’. This customary wage is subject to Dutch payroll taxes. For taxation purposes, the customary wage is at least the highest of the following amounts:

• the wage from the most comparable form of employment.
• the salary of the most earning employee within the company.
• the statutory amount of 56,000 euros (2024).

If you can prove that the highest of these three amounts exceeds the salary from the most comparable form of employment, the customary wage is set at the salary from the most comparable form of employment. The end of the year is a good moment to check whether your salary from your own company meets the criteria for the customary wage regime.

Implementation of periodic settlement clause

If the prenuptial agreement includes a periodic settlement clause, it is advisable to implement it in a timely manner. On the basis of a periodic settlement clause, spouses must divide the income saved in the past year with each other according to their agreement. The new year is an appropriate time to draw up the annual financial balance. In practice, spouses often fail to give effect to a periodic settlement clause during the marriage. In that case, it is advisable to clean up.

Want to know more about the above year-end tips?

Would you like to know more about a subject from these year-end tips? Your Forvis Mazars tax advisor is more than happy to assist you further.