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Government Decides On Significant Tax Changes
The Government emphasises that the solution to the challenges in public finances lies in economic growth and new jobs. The changes will therefore decrease the tax burden of companies but at the same time tighten the taxation on profits taken out of the companies.
Key taxation highlights include:
- The corporate income tax rate will be lowered to 20% (currently 24.5%)
- Private individuals' dividends from listed companies become fully taxable (now 70% taxable at 30/32%)
- 25% of the dividends from unlisted companies are taxable as capital income up to an amount which equals an 8% annual return on the net asset value of the shares owned. Any exceeding dividend amounts are fully taxable capital income. (Current legislation allows a tax-exempt amount of max. EUR60,000, taxation as capital income and/or earned income also possible)
- The progression limit of the capital income taxation will be lowered to EUR40,000 (currently EUR50,000), ie capital income exceeding EUR40,000 is taxed at 32% instead of the 30% applicable to lower amounts
- Excise duties on alcohol, tobacco, sweets and soft drinks are being increased, however VAT rates remain unchanged
- The windfall taxation will be decreased
The new measures are to turn the increase in the debt ratio into a decline at the end of the electoral term. The amount of the net adjustment will amount to around EUR 600 million in 2015. Corporations will welcome the decrease in their corporate tax rate but should watch out for the increase in other taxes which may apply.