The Annual budget: the wealthy have to absorb the blow among others
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Last Tuesday was a very special Prinsjesdag. Not only did the COVID-19 virus dramatically change the ceremony, it also had a significant effect on changing the Annual budget (Miljoenennota) itself. Multinationals, the wealthy, the self-employed, and large companies without investments are going to have a difficult time in the coming year. On the other hand start-up companies, people with savings, and people on fixed salaries receive tax advantages. Pension rebates are expected to go primarily towards the public and healthcare sectors.
The government expects a budget deficit of 43 billion in 2021, and of 53 billion in 2020. Corona-related aid packages for businesses amounts to 46 billion in this fiscal year. Next year the estimated budget deficit is estimated to be 61% of GDP due to falling tax revenues.
Box 3 is addressed
The capital gains tax will be addressed next year. The tax-free capital, the amount of capital for which no tax must be paid, is increased from 30,846 euros to 50,000 euros. On the other hand, the wealthy with more than 50,000 euros will pay more capital gains task. On the calculated returns you no longer pay 30 percent taxes, but 31 percent.
Middle-class and start-ups get more benefits
By reducing the first income tax bracket and increasing the employment discount, the middle class is expected to grow about two percent on their net salary during the next year. The government also wants to help start-ups in the crowded housing market. An example is scrapping transfer tax for persons between the 18-35 years old who purchase their first. Investors who aim to buy a second (or third, fourth etc.) property to rent out must pay 8% tax on the transaction.
Action equals reaction?
The changes highlighted above are summarized from the Annual budget, these changes may affect starters, the middle class, and the wealthy, and they may cause changes in behavior as well.
The withdrawal of highly taxed investors from the housing market may create more room for first-time buyers, and as a result realtors and notaries will see an increased number of clients. The former will assist in the purchase of property, while the latter draws up purchase contracts, mortgage deeds, and the occasional co-habitation contract. The influx of new clients also means that realtors and notaries need to spend more time on client investigations, which can be quite time-consuming.
Just as these changes from the Annual budget may create an abundance of work for notaries and realtors, the same may happen for asset managers. Investors which might be deterred from investing in housing may instead opt to invest their capital through asset managers. Accepting new clients represents a high workload for asset managers, as their inventarisation procedures are very extensive. In addition to the Customer Due Diligence components of this procedure, which is also mandatory for realtors and notaries, asset managers also need to go through so-called "Know Your Customer" procedures. This step requires the creation of a comprehensive inventory which maps a client’s family situation, their financial position, and their knowledge of financial markets and previous experience
You can read more about the difference between CDD and KYC in our blog.
The new policy presented in the most recent Budget Memorandum could provide a boost of new customers at various organizations subject to the Wwft, such as brokers, civil-law notaries and asset managers. However, a thorough Wwft client due diligence takes a lot of time because it is difficult to meet all the requirements imposed by the Wwft. It is also difficult to keep an eye on what changes have been made to the continuously changing Wwft.
SCOPE FinTech Solutions has therefore set up CDD On Demand to support small to medium-sized companies in their Wwft obligations. You can purchase credits yourself via the webshop with which you can conduct a Wwft client investigation within three seconds. Based on this, it is checked within a few seconds whether your client poses an increased risk at one of the checked points, which means that you may need to perform an enhanced customer due diligence.
The CDD On Demand solution also offers the possibility to monitor your clients daily for new or additional risk factors, in which case you will receive a notification immediately. Finally, CDD On Demand offers the possibility to try to find out the UBO behind an authority or organization. At the end of the check you will receive a certified report for your own records.
Better safe than sorry!