A new year means that laws are back in force, including tax laws. What will change, and what does it mean for your wallet? Nikkie den Dekker – co-founder of accounting solution Paperdork – tells you more about the major tax changes in 2023.
Tax changes in 2023 listed
Before we dive into the depths, here is an overview of the major tax changes in 2023 in a row:
- Reduction of box 1 tax
- Change of box 2 tax
- Changes in box 3
- Increase in VPB
- Reduced self-employment deduction
- Increase in mileage allowance
- Abolition of averaging scheme
- Elimination of jubelton
- Abolition of the FOR
Reduction of box 1 tax
The first Box 1 income tax bracket will be reduced in 2023. In this box, you pay taxes on your income from, for example, salaried employment or a sole proprietorship or partnership. In addition, your (first) purchase home is also in this box, with the mortgage interest deduction. In 2022, you were still paying 37.07% tax in the first bracket of Box 1. Starting in 2023, that goes to 36.93%. In addition, the employment tax credit will be increased in 2023 if you have an income between €37,697 and €115,301. But beware: if your income exceeds €37,697, the work tax credit does phase out faster. So it depends on your income to what extent the modified employment tax credit is positive for you.
Changes box 2
Box 2 is the box that applies if you have more than 5% shares in a BV or NV. This is also known as a substantial interest. At present, it happens regularly that a substantial interest holder provides a loan from a (private) limited liability company to himself. As of 2023, “excessive” borrowing is no longer allowed. This means that you have to start paying Box 2 tax on loans from your own company in excess of €700,000.
Box 3 changes
In late 2021, there was a Supreme Court ruling that has a major impact on the operation of Box 3. In this box, you pay taxes on your assets. Think savings, investments and crypto assets. Starting in 2023, the way to calculate whether and how much wealth tax you have to pay will change. In the past, a notional return on your total assets was calculated. Starting in 2023, the actual distribution of your assets between savings, investments and debt will be distinguished. The IRS will then calculate with rates of return that are closer to reality. In other words, there is little return on savings right now, while returns on investments are generally higher. The tax-free capital, the portion of your assets on which you do not pay tax, is increased to €57,000 (without a tax partner). The tax rate in Box 3 does increase 31% to 32%.
Read more about taxes on investments (BOX 3) here.
Increase in VPB
VPB is corporate income tax, or tax on the profits of companies (e.g., limited liability companies). For corporate income tax, the first rate bracket from 2023 will be reduced to €200,000 (instead of €395,000 in 2022). So that means you will face a higher tax rate sooner. It also increases the tax rate in the first bracket from 15% to 19%. So, all in all, this means that the VPB will be relatively significantly increased. So keep this in mind, even in any consideration when switching from sole proprietorship to limited liability company.
Reduced self-employment deduction
It is currently relatively favorable to have a sole proprietorship or partnership. In fact, if you meet the hour criterion, you will pay relatively less tax than someone with the same earned income. This is due in part to the self-employment deduction. In 2022, the self-employment deduction was still €6,310. However, it will be greatly reduced in the coming years. In 2023, the self-employment deduction goes to €5,030. The reason behind this reduction is that the government wants to reduce the difference between employees and self-employed workers.
Increase in mileage allowance
The untaxed travel allowance increased from €0.19 to €0.21 in 2023. So you can be reimbursed a higher amount (untaxed) for your travel expenses. Keep this in mind even if you are an entrepreneur! Because even in that case, you are therefore allowed to deduct higher travel expenses from your profits, provided you use a private car for business trips.
Abolition of averaging scheme
If you had a very fluctuating income over several years, you had the averaging arrangement for that. Instead of paying taxes on actual income in a year, you were then allowed to start paying taxes on an average income over a 3-year period. This can sometimes be more favorable if it puts you in a lower tax bracket. You always do averaging afterwards, after the final assessments of the years have already been imposed. This averaging arrangement will expire. The last time period over which you can resource is the 2022 to 2024 time period.
Elimination of jubelton (reduction in gift exemption for own home)
The so-called “jubilee barrel” is gone as of 2023. In the past, for example, your parents could still gift you roughly a ton tax-free for a home. However, the gift exemption for an owner-occupied home will be significantly reduced to €28,947 in 2023. This should reduce wealth inequality in the housing market. In fact, starting in 2024, this gift exemption for an owner-occupied home will be abolished altogether.
Abolition of the FOR
The FOR stands for the Fiscal Retirement Reserve. This allowed you as a business owner to reserve a portion of your profits for retirement under certain conditions. On that portion of your income, you then pay no income tax yet. That sounds nice, and of course it is. But personally, we were already not big fans of this arrangement. In fact, it was not a tax cut, but a tax shift. You still paid the tax. That may be at the time you retire, but there is also a good chance that it will happen earlier if you stop doing business. This was often forgotten, resulting in very awkward situations. From 2023, it will no longer be allowed to accumulate additional FOR. However, you may leave already accumulated FOR, or convert it to annuity.
More information?
Want a complete overview of all tax changes in 2023? You can find those here. Do you have any questions about specific regulations and what they mean for you? If so, contact your accountant or financial advisor about this.
