Doing income tax returns in the Netherlands
The start of the year signals the need to settle your Dutch income tax return. Finsens explains the basic steps for filing your tax return in the Netherlands.
The start of the year doesn’t just bring New Year’s resolutions, but also the need to settle your income tax return. In the Netherlands, the fiscal year runs from January 1 to December 31. Around the first week of February the tax authorities start sending invitations to submit your income tax return. In general, the tax return has to be submitted before April 1. If you receive the tax form much later than February, a different submission date will be applicable. This date will be mentioned on the form.
If you cannot meet the deadline for filing the return, you can request for an extension. The tax authorities will impose a penalty for late filing, so it is important to keep a close eye on the deadline.
Types of forms
The tax authorities issue different types of tax forms.
> P form: Most common tax form for those who are in a regular employment situation and have resided in the Netherlands the entire year.
> M form: For those who arrived in the Netherlands during the year and became a resident or for those who were a resident and left the Netherlands during the year.
> C form: For non-residents who have had Dutch sourced income during the year.
> W form: For those who have had income from self employment.
> F form: For relatives of a deceased person.
How the system works
If you work in an employment situation, payroll tax is withheld from your salary. The income tax calculation will be as follows.
Salary: EUR 100,000
Income tax due on salary: EUR 42,000
Less payroll tax on salary: EUR 42,000
So, if you work in an employment situation the full year, you will most likely not have to pay any additional income tax. If you are in such a situation, you will probably not even receive an invitation from the tax authorities.
If you haven’t received an invitation to submit your return, you can request the tax authorities to issue a tax form on your behalf. For instance, if you know you have to report income to the tax authorities that hasn’t been taxed yet, you are obliged to request a form and submit your tax return. On the other hand, if you have had tax deductible expenses, you may want to submit your return to reclaim taxes.
However, even in case you do not have anything to declare other than your regular employment income, it may still be worthwhile to submit a return. For instance, if you and your partner both work and have a child under the age of 6, you may be entitled to the income-depending combination tax credit, which is maximum EUR 1,859.
As a single parent, these tax credits may even run up to a maximum of EUR 4,317.
How to file your Dutch tax return
If you do not use the service of a financial advisor, you can also file the tax return yourself. The tax return has to be submitted electronically for which you can download the software program from the website www.belastingdienst.nl. Once completed, you can submit the return electronically by using your digiD. In case you do not yet have a digiD, you can you request one through www.digid.nl.
After you have submitted your tax return you will receive a preliminary assessment from the tax authorities. In case you were invited by the tax authorities to submit your return before 1 April, and you have indeed filed your return before this date, you will receive notice from the tax authorities before 1 July.
In any other case, it may take around 10 to 12 weeks before the tax authorities send you a notice. And if your tax return was submitted with either a C or an M form, it may even take up to 24 weeks or more.
Initially you will receive a preliminary assessment from the tax authorities, which is based on the tax return, but without being checked by the tax authorities. Once they have checked the return, a final assessment will follow.
Filing your first year’s return with an M form
If you came to live or work in the Netherlands in the course of the year or left the Netherlands in the course of the year, then filing a tax return may well be advantageous for you.
Dutch wage and income tax is calculated on the basis of four progressive tax brackets. The higher your income, the higher your tax bracket. The wage tax that is withheld at source from your salary is levied on the basis of your estimated annual salary, which is then calculated back to a monthly amount. Therefore, if you have only worked for half a year in the Netherlands, your gross annual salary will be lower than estimated. The amount of wage tax withheld will therefore be too high. An income tax return will result in a rebate of this wage tax.
In addition, the largest portion of the first and second tax brackets consists of national insurance contributions. If you have only lived and worked for part of the year in the Netherlands, you may be exempt from national insurance contributions for the full year of part of the year.
An example will illustrate this:
Annual income: EUR 100,000
Tax and contributions on the basis of annual income: EUR 42,000
Departure from the Netherlands: 1 July 2013
Income over period 1 Jan–30 Jun: EUR 50,000
Tax and contributions over period 1 Jan–30 Jun: EUR 21,000
Income tax: EUR 9,800
National insurance contributions: EUR 4,800
Total payable: EUR 14,600
Less wage tax withheld: EUR 21,000
Refund: EUR 6,400
Should you have just found out you were probably entitled to a rebate for previous years, but you never filed a tax return, no worries! You can file your tax returns retrospective for five years. So it is still possible to file your 2009 tax returns up until 31 December, 2014.
In short, it may be worth your while to file an income tax return, even if you have not received an invitation yet.
Finsens Financial Services, www.finsens.nl / Expatica
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