Tax Plan 2025: 5 notable changes from the debate in the House of Representatives

The 2025 Tax Plan was adopted by the House of Representatives on 14 November 2024. There has been much debate in recent weeks about the plans presented on Budget Day. This led to a substantial number of amendments (changes) and motions (instructions to the cabinet).

Which changes are notable? And which motions should the cabinet work on? Our experts discuss five notable topics.

Please note that the 2025 Tax Plan (and several associated legislative amendments) has not yet been debated by the Senate. Whether the Senate will also approve the proposals is expected to become clear on 17 December 2024.

VAT rate increase on culture, sports and books scrapped?

The proposed increase of the VAT rate on culture, sports and books attracted a lot of media attention. After the vote in the House of Representatives, many people reacted with relief: the increase was cancelled. The reality is a bit more nuanced: the increase was, in fact, approved as part of the Tax Plan and will take effect ‘as planned’ on 1 January 2026. However, the cabinet has pledged to explore alternatives with the House of Representatives before the Spring Memorandum (no later than May 2025). If there is sufficient budgetary cover, (part of) the increase may still be reversed. 

Anti-fragmentation measure for real estate entities cancelled

The announced tightening of the generic interest deduction limitation in corporate income tax was a significant change for real estate companies. For real estate entities with real estate let to third parties, the current EUR 1 million threshold for interest expenses that are deductible in any case would be abolished. This anti-fragmentation measure was intended to discourage splitting up investments with the aim of maximising the deduction of interest expenses. But the threshold will be retained after all. To cover the measure, the proposed increase of the generic interest deduction percentage, from 20% to 25%, will be limited to 24.5%.

However, a motion was passed: the cabinet must inform the House of Representatives by 1 July 2025 of what anti-fragmentation measures other EU countries have taken. It is possible that this may lead to targeted anti-abuse rules being introduced on this basis.

Keeping and increasing donation deduction for entrepreneurs and individuals

The donation deduction in corporate income tax for entrepreneurs will be retained after all, up to a maximum of 50% of profits or EUR 100,000 per company. Please note: from 2025 onwards, donations of a private nature will again be regarded as a distribution to the shareholder, meaning that dividend tax and a levy in Box 2 must be taken into account.

Additionally, the deduction for periodic donations in personal income tax will increase from EUR 250,000 to EUR 1.5 million. This measure aims to provide tax support for donation behaviour. To fund this, among other things, the tax concurrence between the Environmental investment deduction (MIA) and Accelerated depreciation of environmental investments (Vamil) has been abolished.

Increase of work-related expenses scheme for good employment practices in SMEs

Employers can give benefits in kind to staff without paying payroll taxes within the free room under the work-related expenses scheme (WKR). In 2024, the discretionary margin is 1.92% over taxable wages up to EUR 400,000; for wages over EUR 400,000, a rate of 1.18% applies.

As of 2025, the discretionary margin will be increased: the rate for the first bracket will rise from 1.92% to 2%. It has been proposed to further increase this rate to 2.16% as of 2027.

The additional margin is intended to promote good employment practices, for example by offering healthy lunches, gym memberships, or a work-from-home allowance. Read more about the work-related expenses scheme here.

Structural budget increase for WBSO by EUR 100 million

The R&D wage subsidy scheme (WBSO) offers a (wage cost) subsidy for certain innovative activities. The WBSO budget has been structurally increased by EUR 100 million. This is intended to contribute to the Dutch knowledge economy and is important for smaller entrepreneurs and start-ups. The proposed changes to the WBSO are:

• to increase the start-up deduction to 50% to provide additional support to start-ups for innovation;

• to increase the first bracket rate to 36% to further encourage small investments; and

• to increase the first bracket from EUR 350,000 to EUR 380,000.

Closing tax gap between one and two-income earners

The tax gap between one and two-income earners is being reduced. The gap had arisen due to restrictions on the transfer of tax credits between partners. The change from the 2025 Tax Plan ensures that working single earners are also entitled to the transferable general tax credit, which should reduce inequality.

Further changes

Aside from these five notable changes, other amendments were also made during the debate. Keep in mind, however, that the legislative proposals have not yet received final approval.

Would you like to know more? Your advisor would be happy to tell you more about the changes that matter to you.

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.