Law Changes 2021: Work, Income and Pensions

The Dutch government will implement over 60 new rules, regulations, and law changes at the stroke of midnight on January 1. Below is a summary of the 2021 changes made in the category Work, Income and Pensions:

The basic income tax rate will fall from 37.35 percent to 37.10 percent, providing some relief for people. The tax rate is levied on income earned between 35,129 to 68,507 euros. All income below that range is taxed at 9.45 percent, while all income over that rate is taxed at 49.50 percent.

The minimum wage will rise less than 0.3 percent starting in 2021. That will trigger a series of adjustments in ten different social benefits, like unemployment, payments to surviving dependents, and the basic pension rate.

The asset tax, also called "Box 3" in the Netherlands, will be eliminated for people with savings and investments valued at under 50 thousand euros. Those with a fiscal partner will not pay tax on savings up to 100 thousand. That threshold was at about 31 thousand for single people, and was over 61,500 for couples at the end of 2020.

Municipalities will be able to more quickly assist people who have a mounting level of debt, or who are at a high risk of falling into financial trouble. Companies and government agencies will be allowed to communicate with municipalities when a registered resident falls behind on their bills.

People who receive disability benefits under the Wajong Act will be able to receive a higher income, and will have more flexibility to maintain all or some of their subsidy payment when they follow a course or their work situation changes.

Workers will benefit from an increase in the labor tax credit, which was initially planned for 2022. Someone earning 20 thousand euros will pay 122 euros less tax than they did over their 2020 income. That rises to 428 euros for those earning 40 thousand or more.

The general tax credit will increase, meaning everyone earning 68,507 euros or less will benefit. Those earning up to 20 thousand will benefit the most by paying 126 euros less to the Belastingdienst.

Training provided by an employer to current and former employees will no longer be subject to payroll tax.

Employers will be allowed to continue to give a tax-free travel allowance to employees who are working at home due to the coronavirus pandemic. The rule was set to expire, but was extended beyond January 1 until at least February.

The national pension age will remain at 66 years and 4 months, and will rise by 3 months at the start of 2022. It will then be set at 67 years in 2024.

Pensioners earning up to 49,323 euros will also get a tax credit. This will mean that anyone of pension age will pay no tax if they earn under 15 thousand euros per year. Some people will benefit up to 1,703 euros, but those earning between 35 and 49 thousand will only benefit by about 80 euros. Those earning above 49 thousand will not be impacted.

Another income tax credit, known as IACK, will fall for many people, with some having to pay up to 66 euros more to the tax office because of it. The government said the reduced amount was to compensate for a court ruling which determined that co-parents also qualify for the credit.

Deductions will be capped at 43 percent for personal line items like alimony or healthcare, as well as business facilities, for anyone earning over 68,507 euros.

Insurers providing death and funeral insurance to former cancer patients who have been in remission for 10 consecutive years may no longer take the illness into account when determining the premium. That period is 5 years for anyone up to the age of 21.

A new formula to determine how much of a person's income is protected from creditors will go into effect.