Tax credits and rates in 2016
The tax rate in the second and third tax brackets (currently 42%) will go down to 40.15%. Furthermore the third bracket is extended, meaning that the top rate of 52% will become applicable on income exceeding EUR 66,421 (currently this 52%-rate applies as from EUR 57,585).
For persons that have not reached the official retirement age (65 years and a few months) the tax rates for 2016 will become as follows:
The flipside of the rate reduction can be found in the field of the tax credits. The general tax credit is phased-out at steeper pace and in full (the minimum tax credit amount is abolished). At an income level of approximately EUR 66,000 (end of third tax bracket) the general tax credit is phased-out completely, hence no tax credit left for persons in the 52% tax bracket.
The changes in the tax credit for actively earned income (labour credit) are more diverse. The maximum amount of this credit is increased but the phase-out phase of this credit starts earlier. Also the labour credit is phased-out completely for higher incomes. In this case this means that the labour credit is nil for persons with an income above EUR 111.600. Overall the measures regarding the labour tax credit are positive, especially for persons earning an income between 20,000 and 50,000 euro and only persons with an income above 105,000 will incur a modest tax increase (maximum disadvantage for this group of 184 euro per year).
The income-related accrual of the labour credit will also be incorporated in the wage tax table for exceptional remunerations to achieve that the wage tax better aligns with the personal income tax.back to overview