Foreign workers recruited abroad will still have the opportunity to keep a portion of their income earned in the Netherlands without paying tax on it, but that amount will be reduced from 30 percent to 27 percent, the Telegraaf reported on Friday. Leaked details about next year's budget also include a plan to charge a lower transfer tax on investors and others purchasing a second residential property, and RTL Nieuws reported that more money will be made available to keep a program in place to provide free meals to schoolchildren.
The cut to the 30 percent ruling is far less severe than anticipated, though it was not entirely abandoned. It is expected that those who qualify for the tax break will still be able to shield 27 percent of their income for five years. A last-minute proposal from NSC leader Pieter Omtzigt to cut the tax break for some qualified immigrants was intended to be slashed to 10 percent in stages.
The measure was criticized by business leaders desperate to fill a shortage of positions requiring highly-skilled and highly-educated people. Still, the populist proposal won substantial support in Parliament, playing into rhetoric against foreign nationals during the campaign for the election last November. Omtzigt led his party's first election, securing 20 seats in the Tweede Kamer, the lower house of Parliament. His party joined the PVV, VVD and BBB in forming the new Cabinet, which took office just before the summer.
The parties discovered during the months prior that many large businesses were considering freezing or scaling back operations in the Netherlands while rolling out expansion plans abroad. This was due to what they perceived as a hostile political environment towards international business and foreign nationals. Among those businesses is microchip machine manufacturer ASML, which needed to be lured with a massive sweetheart deal to promote investment in the Eindhoven region, housing, the tech sector, and technical education.
Single-income households are also likely to continue to qualify for a tax cut in 2025. Also, the Cabinet is expected to increase the benefit some parents qualify for to help with costs related to their children.
These plans are in addition to the expected introduction of a new, reduced income tax bracket. Neither the tax rate nor the income level is currently known, but it will likely apply to the first portion of earned income. Currently, residents pay 36.97 percent on the first 75,518 euros earned in a year, and 49.5 percent on anything above that amount. Five years ago, there were four tax brackets in the progressive income tax system which effectively charged 9 to 10.45 percent on the first 34,300 euros earned by anyone younger than retirement age, 38.10 percent on earnings up to 68,507 euros, and 51.75 percent for top wage earners.
Additionally, the 2025 budget from the first Cabinet of Prime Minister Dick Schoof will reduce the real estate transfer tax on second homes from 10.4 percent to roughly 8 percent, the Telegraaf reported. Over the last few years, the tax rose from 6 percent to its current state, but the higher fee is seen as being partially linked to the loss in rental housing supply.
The Cabinet hopes that this will help stimulate transactions to make the real estate market more attractive to investors who want to rent out properties. It was not entirely clear what other proposals the Cabinet considered to stimulate the development of rental properties. The housing minister launched a new campaign this week to try to convince residents of the Netherlands to take on boarders as a way of reducing the student housing shortage.
More money will also be made available to extend the current program providing free meals at school for primary and secondary school students based in some of the country's poorest neighborhoods. Currently, the program is operating from an earmark of 166 million euros provided by the previous Cabinet, which makes it possible for about 2,200 schools to provide breakfasts, lunches, snacks, or groceries.
The amount of money made available next year is not yet known, but the program could have a different impact than the current program. Next year, schools will only qualify if a third of their students are from a family with a low household income, RTL Nieuws reported. Newswire ANP reported that between 100 to 130 million euros per year to assist 350,000 children with better nutrition.
The annual budget is typically presented on Prinsjesdag, which takes place annually on the third Tuesday in September. This year, the presentation will take place on September 17, and will be debated in Parliament soon after. The 2025 budget proposal is also expected to include in annual increase in the police budget of about 100 million euros, and a plan to extend or replace the existing early retirement scheme for people in certain physically or mentally taxing professions.
