The new government plans to cut taxes for both workers and businesses. The tax system is being made simpler and more efficient: several tax breaks are to be scrapped. The new hotly contested capital gains tax on shares will be charged at 10 per cent, though small investors are spared.
Higher take-home pay, but not straight away
The difference between working and not working should be worth at least 500 euros per month. The government wants to guarantee that in the long run. That is why the taxes you pay on your wages are going down. In future employees will receive a larger share of their gross earnings.
The government will do this by increasing the tax-free allowance i.e. the amount of money you can earn before tax is charged. Today that sum is 10,570 euros a year. Another tax, the ‘special social security contribution’, will also be cut.
Exactly how much that will add to your monthly wages depends on many factors. Wages will increase only gradually from next year onwards. The really big tax cut will only materialise towards the end of this parliament in 2029.
According to the parties’ calculations, a single worker could look forward to 1,200 euros extra before tax per year by then, in the case of a working couple this figure rises 1,900 euros.
Investors to pay more
The new government is introducing a capital gains tax on shares - which the government calls a ‘solidarity contribution’ – It will be charged at 10 per cent. It is paid on all profits from financial assets such as shares. Crypto currencies are also covered by the tax.
To spare small investors, the tax only applies from 10,000 euros capital gains. Capital losses are deductible within the year and cannot be carried forward.
For people with a so-called’ substantial interest’, which is when you own more than 20 per cent of the shares of a company, different rules apply. In practice, these are often people with their own company. In that case, the exemption on the capital gains tax rises to EUR 1 million.
Tax breaks cut for businesses, but wage costs too lowered
The government is also reforming tax breaks for companies. As a result, large companies in particular will have to pay more tax.
The securities tax on investors with at least a million euros in investments will remain at 0.15 per cent, but the government will investigate how better to tackle evasion of that tax. The government will also move against tax evasion in general.
Another of the objectives of the tax reforms is to ‘reduce costs for companies and encourage innovation’, the coalition agreement states.
Not only will working people have to pay less tax, so will companies. First and foremost, the government wants to reduce labour costs to benefit companies, especially wage costs for low and middle earners will be cut. A capping of employer social contributions should also reduce costs on companies.
By abolishing a whole series of smaller taxes, over time, the government hopes to help the self-employed and SMEs financially and reduce administrative red tape. ‘Making entrepreneurship pay more,’ is their motto.
Tax breaks disappear
The coalition agreement also includes a whole raft of different tax measures. These include changing rates or abolishing tax benefits altogether.
The tax deduction for donations goes from 45 per cent to 30 per cent. This could make a big difference for charities that rely on income from donations.
By 2029 the ‘marriage quotient’ will be halved for non-retirees. Under that system, taxes are calculated more advantageously for couples when one partner has no or little income. For pensioners, the government intends to end the practice in the long term’.
VAT on the purchase and installation of heat pumps is being temporarily reduced from 21 to 6 per cent for the next 5 years.
A reduced VAT rate of 6 per cent on demolitions and renovations will remain in place.
The tax rebate for adoption costs, the tax rebate for legal aid and the tax rebate for electric motorbikes, three-wheelers and four-wheelers, are going to be scrapped.
The tax reforms and all accompanying measures will take effect from 2026