Please note!This article outlines government proposals that will be debated by the Lower and Upper House over the forthcoming period. Unless indicated otherwise, the proposed measures will enter into force with effect from 1 January 2026.

1. Employers will pay a 12% levy on company fossil fuel passenger cars

From January 1 2027 as an employer, you will owe a pseudo-final levy of 12% if you provide a passenger car with CO2 emissions to an employee for private use and/or commuting. The aim of this scheme is to accelerate the transition to electric passenger cars, in line with the climate targets for 2030. Fully electric passenger cars and passenger cars used exclusively for business purposes are excluded from the regulation.

Please note!Commuting is explicitly classified as private use. This is therefore different from the calculation of the additional tax liability for private use of a company car!

From January 1 2027 you will therefore have to calculate a pseudo final levy on a monthly basis. You can pay this levy monthly, but you can also wait until the second payroll tax period in 2028 to pay it. The levy may not be passed on to the employee. A personal contribution from the employee for private use does not affect the amount of the levy.

Please note!Until 17 September 17 2030 no pseudo-final levy is due on passenger cars made available to employees before 1 January 2027. After this date, the levy will apply to all fossil fuel passenger cars used for private purposes.

2. Adjustments to box 3: higher return, lower exempt capital

From 1 January 2026 the government will implement a number of adjustments to the current box 3 scheme as a prelude to the new system based on actual returns. The intended implementation date of the new system is 1 January 2028. Below are the most important points as of 1 January 2026:

• The fixed return for other assets will increase from 6% to 7.78%. The 1.78% increase is intended to cover the expected budgetary loss from the later introduction of the new system (2028 instead of 2026).
• At the same time, also to cover the budgetary loss, the tax-free allowance will decrease from € 57,684 to € 51,396 per person, as a result of which more taxpayers will pay box 3 tax.
• The rules for rebutting the presumption of actual return will be tightened. Among other things, this is intended to combat tax avoidance through bonds with accrued interest. Purchases made after 25 August 2025, will be subject to stricter conditions.
• The vacancy value ratio will be limited: renting to affiliated parties at a non-market rent will no longer be covered by this scheme. This prevents tax advantages through artificially low rents. Affiliated parties are parties that are so closely related that they agree on a rent that would not normally apply in the market. 

3. Various changes to rates

For taxpayers younger than the state pension age, the rate in the first income tax bracket will decrease slightly, from 35.82% (2025) to 35.70% (2026). The second bracket will increase slightly, from 37.48% (2025) to 37.56% (2026). The third bracket will remain unchanged (49.50%). For taxpayers older than the state pension age, there will be a reduction in the first bracket from 17.92% (2025) to 17.80% (2026). The second bracket will increase slightly, from 37.48% (2025) to 37.56% (2026), and the third bracket will also remain unchanged (49.50%).

In addition, the bracket lengths in box 1 of the income tax will change with limited indexation. The highest rate of 49.50% will apply to incomes above €79,137.

To make working more attractive, the maximum employed person’s tax credit will be increased from € 5,599 (2025) to € 5,712 (2026).

The maximum general tax credit will increase slightly, from € 3,068 to € 3,115 (for taxpayers older than the state pension age from €1,536 to € 1,554), and the maximum income-related combination credit will increase from € 2,986 to € 3,032. The elderly tax credit and the single parent tax credit will also increase slightly.

For entrepreneurs, the self-employed deduction will decrease from € 2,470 to € 1,200; this is in line with the policy of phasing out tax benefits for the self-employed. For entrepreneurs, this means that the tax incentive for self-employment will further decrease. The SME profit exemption will remain unchanged at 12.70%.

4. The reporting obligation for personal mobility will be relaxed

The reporting obligation for work-related personal mobility (WPM) now only applies to companies with 250 or more employees. Previously, this obligation applied to companies with 100 or more employees, but on Prince´s Day it was announced that the threshold for the obligation would be raised to 250 employees.

5. Clarification of bicycle scheme

Since 1 January 1 2020 an additional tax liability of 7% (minus any personal contribution by the employee) applies to a company bicycle that an employee also uses privately. This additional tax liability is mandatory as soon as the bicycle is used for commuting. The government proposes to amend this scheme with retroactive effect to 1 January 2020. If the bicycle is not parked at the employee’s home or place of residence, or if it is parked there for no more than 10% of the time, the additional tax liability is zero. This means that no wage or income tax is due. In this way, the scheme prevents unintended taxation in the case of, for example, hub bicycles or campus bicycles. This scheme also applies to entrepreneurs subject to income tax.

Please note!If the bicycle is parked more than 10% at the employee’s home or place of residence, the regular additional tax liability of 7% applies.

6. Transfer tax: introduction of 8% rate in 2026

From 1 January 2026 four rates will apply to transfer tax (already adopted in 2024). The standard rate of 2% applies to homes that the buyer uses as their primary residence. First-time buyers under the age of 35 can, under certain conditions, apply a 0% exemption when purchasing a home with a market value of up to € 555,000 (2026). For homes that are not used as a primary residence, a new rate of 8% will apply from 2026. This includes investment properties, vacation homes, homes for children, or rented homes.

Please note!The rate for non-residential properties will remain at 10.4%. This applies to commercial real estate, business premises, and undeveloped land, for example.

7. VAT on culture, media, and sports will remain at 9%

The government has decided to maintain the reduced VAT rate of 9% on culture, media, and sports. The increase to 21% as of 1 January 2026, which was adopted at the end of 2024, will therefore be scrapped. Maintaining the low rate will cost € 1.3 billion on a structural basis. The government will cover this by limiting the inflation adjustment on income and payroll tax.

Please note!However, the general rate of 21% will apply to accommodation providers (such as hotels and B&Bs) from January 1, 2026. This adopted VAT increase will therefore not be reversed.

8. Early retirement scheme to be continued on a structural basis from 2026

The temporary RVU threshold exemption will be continued on a structural basis from 2026. This will allow employees – under certain conditions – to stop working up to three years before reaching the state pension age and receive a benefit. If that benefit remains within the threshold amount, the employer will not pay a pseudo-final levy of 52%.

In addition to the continuation of the scheme, the threshold amount will also increase by € 300 gross per month and this amount will be indexed annually in line with the minimum wage. In 2025, the RVU threshold exemption will be € 2,273 per month.

The pseudo-final levy paid on amounts above the RVU threshold exemption will also increase. Above this threshold, a pseudo-final levy of 52% currently applies, but this will rise to 57.7% in 2026, to 64% in 2027, and to 65% from 2028 onwards.

9. Tax benefit for green investments reduced

Green investments currently yield a tax benefit through an exemption in box 3. In addition, a tax credit of 0.1% applies to the exempt amount. The scheme applies to investments in recognized green funds that finance sustainable and innovative projects.

This benefit has already been gradually phased out since January 1, 2025. In 2025, the exemption will be € 26,312 (€52,624 for tax partners). In 2026, the exemption will still exist, but in 2027 it will only amount to €200 (€400 for partners). The scheme will therefore effectively be abolished.

The tax credit will formally remain in place in 2027, but the effect will be marginal due to the 0.1% percentage. The tax benefit was actually supposed to be abolished on January 1, 2027, but due to implementation problems at the Tax and Customs Administration, the final abolition has been postponed to 1 January 1 2028.

10. Clarification of inheritance and gift tax

Four measures relating to inheritance and gift tax were presented on Prince`s Day 2025. The government’s aim is to clarify tax practice and prevent unfair situations. The proposed measures are:

• From 1 January 1 2026 gifts made within 180 days of death will only be taxed through inheritance tax and no longer first through gift tax. Currently, both a gift tax and inheritance tax return must be filed.
• From 1 January 2026 biological children without legal recognition will be treated in the same way as legally recognized (biological) children for inheritance and gift tax purposes. This will allow them to benefit from the child rate and the child exemption. A close personal relationship is implicitly demonstrated by the fact that the biological parent makes a gift to the child or leaves something to them. The condition is that biological parenthood can be proven by means of a DNA test.
• Incidentally, by invoking the hardship clause, it will also be possible to request the application of the child rate and the child exemption before 2026.
• In the case of prenuptial agreements with unequal shares (e.g., 90/10), everything above 50% is subject to inheritance or gift tax. Prenuptial agreements concluded before 4 p.m. on 16 September 16 2025, are excluded from this measure, provided that they are not amended at a later date.
• The filing deadline for inheritance tax is extended from 8 to 20 months after death. Tax interest will only start to accrue from the 21st month. This gives you more time to file a correct and complete return and reduces the risk of requests for deferral and objection procedures.