This tariff is very important for both the individual as the business owner. This tariff reduction means that individuals and business owners will pay less in income and payroll taxes in 2021. Employees will certainly notice a smaller payroll tax amount retained by their employer, meaning the employees will receive more on their paycheck.
Considerations
The tariff reduction is an essential part of the Fiscal Reform that the Minister of Finance, Economy and Culture and the commission in charge of the implementation of the tariff simplification system, have been introducing since 2019, including the increase of the tax-free limit to Afl. 27.751,00
In 2020 they continued with the planned changes and have again increased the tax-free limit to Afl. 28.861.
In 2020, the Covid-19 pandemic caused a serious social-economic emergency that took the Government time to get out of. Many households suffered considerable income losses. Meanwhile, the Government initiated the economic recovery process and it was considered appropriate to reduce the income and payroll tax tariffs to provide some financial relief for its contributors. These tariff reductions will also provide relief in the purchasing power of each person and create stability in the economy.
| The new income and payroll tax table 2021: | ||||
|---|---|---|---|---|
|
With an income of more than |
is the tax for the amount |
|||
| I | II | III | IV | |
| 1. | - | 34.930 | - | 12,00% |
| 2. | 34.930 | 65.904 | 4.191,60 | 23,00% |
| 3. | 65.904 | 147.454 | 11.315,62 | 42,00% |
| 4. | 147.454 | - | 45.566,62 | 52,00% |
| Explanation | |
|---|---|
| Tax free sum | Afl. 28.861 (remains the same as the year 2020) |
| Income categories |
- For all 4 income brackets the amounts mentioned in column III are reduced. - For income bracket 1, the percentage mentioned in column IV is reduced to 12% (this was 14%). - For income bracket 2 the percentage mentioned in column IV is reduced to 23% (this was 25%). |
How to calculate your tax amount??
Examples:
- Before applying the tariff table to calculate the tax amount, the tax free sum of Afl 28.861 must be deducted.
- At the end the tax amount is rounded.
| Example: 1 | |
|---|---|
| Taxable income Tax free sum |
Afl. 68.864 |
|
Amount on which the table is applied |
Afl. 40.003 |
| Balance | Afl. 5.073 |
|
Tax on Afl. 34.930 according to column III |
Afl. 4.191,60
|
| Total tax owed | Afl. 5.358,39 |
| Owed Income tax or payroll tax | Afl. 5.358 (per year) |
The Tax Department has an Excel file calculator ‘Berekening IB-LB 2021’ which all their clients can use to automatically calculate their taxes.
Ministerial Decree
In order to execute article 25 paragraph 3 and 4 of the income tax law, the tariff changes have been formalized in the Ministerial Decree issued on December 28 2020 (AB 2020 no. 207).
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