What Budget Day 2021 means for you
Now that Budget Day is behind us and the government has announced its tax plans for the coming year, we can examine what these plans mean for you and your business. We have set out the most important ones for you below.
From 2022, the standard corporate income tax (CIT) rate of 15% will apply to profits of up to €395,000 (previously: €245,000). This change may benefit many entrepreneurs with a private limited company (bv).
Companies will be able to offset dividend withholding taxes and taxes withheld on games of tax only against CIT payable. Rebates will no longer be available. However, it will be possible to offset these withholding taxes in a subsequent year.
Plans to continue phasing out this allowance had already been announced. The tax benefit available to self-employed people is being reduced from €6,670 in 2021 to €6,310 in 2022. Over the coming years it will be further reduced to reach €3,240 by 2036.
Environmental investment scheme (MIA)
The government is increasing the percentage deductions for investments in environmentally friendly assets. Being able to deduct a higher percentage of the costs of these investments from taxable profits means businesses will pay less income tax or CIT.
Electric vehicles for businesses
Sales of zero-emission cars will continue to be encouraged in 2022. The discount on the taxable income surcharge set for these cars in 2022 is 6%, meaning an overall discount of 16%, on a maximum catalogue price of €35,000 (previously: €40,000).
Tax-free travel allowance and home office allowance
From 1 January 2022 the government is introducing a non-taxable home office expense allowance of up to €2 per day or part of a day. This amount has been set following research by the National Institute for Family Finance Information (Nibud).
Under these plans you can agree with your employees on the number of days to be worked from home and use this as the basis for calculating a fixed expense allowance. There is no need to adjust this allowance if an employee occasionally works a day in the office rather than at home, or the other way round. But it will need to be adjusted if the employee structurally starts working more often at home, or more in the office.
Employers will not be liable for payroll tax on this home office allowance. The tax-free travel allowance for commuting (€0.19 per kilometre) will also continue to apply.
Work-related costs scheme and corona
Changes are being proposed to the work-related costs scheme in response to the corona virus and the resultant change in working conditions.
In 2020 the government responded to the outbreak of the pandemic by increasing the tax-free budget from 1.7% to 3% on the first €400,000 of a company’s wage bill. This was intended to give employers more scope for tax-free reimbursement of costs incurred by employees working from home. This increase continued to apply in 2021, but will end in 2022. As of 2022, a percentage of 1.7% instead of 3% will apply to the first € 400,000 of the wage bill. Above € 400,000, a free margin of 1.18% applies in 2022 (as in 2021).
Share options for employees
If employees receive part of their salary in the form of share options, a choice has to be made on when these options are taxable. In principle, this is either when the shares are tradeable and the proceeds are received, or when the options are converted into shares.
Income-related combination tax credit (IACK)
The government is reducing the maximum annual income-related combination tax credit by €318 so as to offset the costs of providing nine weeks of paid parental leave (from 1 August 2022). This includes the increase of €77 announced last year.
The above plans will become final by the end of December, once they have been approved by the House of Representatives and the Senate.
We will be happy to discuss what the plans mean for your specific situation. And so if you have any questions, please do not hesitate to contact us.