Overview of 2016 tax rates and tax credits

Below please find an overview of tax rates and tax credits in the income tax sphere from the first of January 2016 onwards.

“Box 1” rates
The first-tier income tax rate for “Box 1” has been fixed at 8.40% (2015: 8.35%) and the second-tier rate, at 12.25% (2015: 13.85%). This has caused the first and second tier rates inclusive of 28.15% in national insurance contributions (unchanged from 2015) to turn out at 36.55% (2015: 36.5%) and 40.4% (2015: 42%), respectively. No further national insurance contributions are levied on third and fourth tier income components. The third and fourth tier income tax rates have been fixed at 40.4% (2015: 42%) and 52% (2015: ditto), respectively.

The national insurance contribution rate for those to whom the General Old Age Pensions Act of the Netherlands applies owing to their having reached state retirement age works out at 10.25% (unchanged from 2015) rather than 28.15% for the first and second tiers owing to this category of tax payers no longer having to contribute to the state retirement pension coffers.

“Box 2” rate
The regular “Box 2” income tax rate amounts to 25% unchanged from 2015.

“Box 3” rate
The “Box 3” rate, at 30% on a 4% notional return (or 1.2% of underlying value effectively), likewise has not changed compared with 2015 notwithstanding the meagre returns on savings and investment balances.

Tax credits

• The maximum general tax credit has been fixed at € 2,242 (2015: € 2,203), and from an income level of € 19,922 upwards (2015: € 19,822) declines by 4.822% (2015: 2.32%) to nil (2015: € 1,342). The general tax credit for those having reached state retirement age had already been curtailed to € 685 in 2015.
• The maximum employee tax credit has been fixed at € 3,103 (2015: € 2,220), and from an income level of € 34,015 upwards (2015: € 49,770) declines by 4% (2015: ditto) to nil (2015: € 184). The employee tax credit for those having reached state retirement age had already been curtailed to € 94 in 2015.
• The maximum work bonus has been fixed at € 1,119 (unchanged from 2015). The corresponding age minimum has gone up by one year, from 61 to 62 years.
• The means-tested combination tax credit has been fixed at a minimum of € 1,039 (2015: € 1,033), to increase by 6.159% (2015: 4%) from an earned income level of € 4,881 (2015: € 4,857) upwards to a maximum of € 2,769 (2015: € 2,152).
• The temporary tax credit in connection with early retirement and pre-pension schemes has been abolished. (In 2015 it still amounted to 0.33% of the benefit payments to a maximum of € 61.)
• The tax credit in connection with leave taken under the life course savings scheme has been capped at € 209 (2015: € 207) per year of contributions having been made to the life course savings scheme.
• The tax credit for young disabled persons has been fixed at € 719 (2015: € 715).
• The tax credit for the elderly has been fixed at € 1,187 (2015: € 1,042).