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In an attempt to revive the economy after the COVID crisis, the government has made changes to laws aimed at accelerating economic development. The following proposed changes to tax legislation are expected to come into force in January 2022.
On May 5, 2021, the government approved proposals for three laws:
Amendments to the Personal Income Tax Act
With the bill amending the law on personal income tax, the government wants to help the economy by relieving taxpayers.
1. End of General Relief
By gradually increasing the general allowance, the tax burden on earned income will be reduced. General tax relief for all taxpayers is expected to gradually increase from the current €3,500 to €7,500 by 2025.
Under the proposed changes, the general allowance would increase to €4,500 next year. This means that minimum wage recipients could expect a €160 increase in their take home pay this year. Similarly, people earning an average salary could expect an increase in their net annual salary of €260.
2. Tax reduction for high earners
The proposal also brings changes to the levels of the personal income tax scale. The biggest change is expected in the highest tax bracket, where the tax rate is expected to be 5% lower; thus falling from the current 50% to 45%.
3. Introduction of senior succession
The Amendment to ZDoh-2 (Personal Income Tax Act) lays the groundwork for the reintroduction of senior citizen relief, namely a reduction in the annual tax base in the amount of 1 €500 per year will be applicable for tax residents after reaching the age of 70. .
4. Capital gains tax
Tax benefits will no longer be taxed after 15 years. In addition, the tax rate on interest, dividends and capital gains is reduced from 27.5% to 25%.
The rental income rate is also changing, falling to 15%. However, the level of standard costs recognized for determining the tax base of rental income is also reduced from 15% to 10%.
Corporate tax changes
1. Modification of grant facilities
The tax credit for subsidies is reduced from 0.3% of taxable income currently to 1%.
2. New relief for investments in the green and digital transition
Entrepreneurs who want to invest in cloud computing, artificial intelligence, environmentally friendly technologies, cleaner, cheaper and healthier public and private transport, decarbonization of the energy sector, energy efficiency buildings, the introduction of other climate neutrality standards may consider tax exemption of 40% of the amount invested.
3. Employment Benefits
With the aim of facilitating employment, the government has developed three different types of benefits, which are mutually exclusive:
- Persons under the age of 25: for the first job of such a person, the employer benefits from a benefit of 55% of the salary for the first 24 months of employment.
- Persons under 29 (previously 26) and over 55: If an employer rehires such a person for an indefinite period, they are entitled to a 45% allowance for the first 24 months of employment.
- Allowance for deficit occupations: Employers will be able to claim a 45% allowance for the first 24 months if they employ a person exercising a profession for which there are not enough personnel on the labor market according to the needs of the employers. .
Value Added Tax Changes
The main guideline in drafting the law amending the law on value added tax was to simplify the administration for taxpayers as well as for the tax authorities.
1. Facilitation in the purchase of an electric vehicle
An important new feature of the proposal is the introduction of a value added tax deduction for personal motor vehicles with zero carbon dioxide emissions – electric vehicles used by entrepreneurs to carry out their activities. In the case of such a vehicle, input VAT could be deducted, if the total value of the vehicle (including VAT and other charges) does not exceed €80,000.
2. Change for farmers
Farmers can decide freely whether or not they want to enter the TAX system, because there is no longer a limit
3. Obligation to print the invoice
The issuance of a printed invoice is no longer mandatory for national deliveries of goods or B2C transactions. The taxpayer delivers them only at the express request of the buyer. For all other transactions, the obligation to print the invoice remains.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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