Let Dutch taxes work for you
Effective tax planning is not only important during tax season but also during an expat's immigration, emigration, start of employment and property sale or purchase. [Contributed by J.C. Suurmond & zn. Tax Consultants]
Experienced expats in the Netherlands probably know by now that their tax return has to be filed before 1 May. If you are new, note this date in your agenda and make sure you get it done, preferably not by yourself — to save yourself some frustration.
However, tax return season is not the only time you should bother yourself with Dutch taxes. If you really want to take your integration in Holland seriously, you should learn how to let taxes work for you. The Dutch tax system is not as harsh as often thought, especially for expats where the 30 percent ruling applies.
Tax planning is especially important before immigration, emigration, start of employment, purchase or sale of a property, etc. If properly planned before taking any action, you will surely benefit from this.
A very current subject is the tax on savings, known in the Netherlands as the box 3-levy. It is important that you have opted for partial non-resident taxation to make use of this saving scheme. If the 30 percent-ruling does not apply, it is not possible to opt for partial non-domestic taxation and thus your worldwide assets are taxable in the Netherlands.
For foreign real estate, double taxation should be requested. The tax free amount for 2015 is EUR 21.330 per partner. The tax over the surplus is 30 percent over four percent deemed income (in total 1,2 percent). This rate of four percent deemed income has been heavily criticized in these years of low interest rates, where the tax often supersedes the income. The plan for 2016 is to raise the tax free amount per partner to EUR 25.000 and have a bracket system in place for the surplus. The tax rate of 30 percent will remain, however, the deemed income will change to 2,9 percent up to EUR 100.000, 4,7 percent between EUR 100.000, and EUR 1.000.000, and 5,5 percent over assets exceeding EUR 1.000.000. For partners with assets up to EUR 50.000, there will be no savings tax.
The property where you reside in is not classed as an asset. That particular property is taxed in box 1, not in box 3. Thus, if your first residence property has a value of say EUR 1.000.000, and you have no mortgage, there is no tax on this. One way to save on box 3-taxation is to repay the mortgage on the box 1 property. You can consult a financial or tax advisor regarding what is wise in your situation.
Mortgage interest deduction
If you know you will be living (partially) in the Netherlands for a longer period, it can be quite favourable to buy a house instead of renting one. The rent is usually high for expats and there are several advantages in owning a house like the fully tax deductible interest paid on a mortgage on your primary residence, as well as mortgage related expenses. The maximum tax deduction rate will be gradually limited, but is still an advantageous facility. Also, the interest rate for mortgages is currently at its lowest in Holland, which makes your monthly expenses lower than if you were renting a house. The tax relief can be paid in monthly instalments during the year, after filing the tax form for a provisional refund for mortgage relief, to be requested at the Tax Authorities.
If you move out of the country again, you can rent the house out, sell it, or keep it for your own use. If you keep it for your own use, in some circumstances, the property can remain in box 1 with mortgage interest deduction. In case you sell the property, note that there is no capital gains tax.
Tax and immigration
An obvious, but still sometimes forgotten, situation in which it is likely that you as an expat will be entitled to a refund is at the beginning of your time in the Netherlands. When you register in the Dutch city council or town hall where you reside the tax authorities will be notified automatically and consider your registration as immigration. You will then be regarded as a domestic taxpayer, with all the advantages and disadvantages of a regular Dutch taxpayer. In this year you will have to submit a special migration tax form which transfers your status from non-domestic to domestic taxpayer. Although this tax form is more complicated, it provides more opportunities for a refund. The next years you will need to file a regular tax return. Registration however is not always favourable, for example in case you only stay in the Netherlands for several months.
Emigration and finalising tax
Also, do not forget to deregister with the city council when you emigrate again from the Netherlands. This counts in case you become an expat elsewhere or return to your home country. You will have to mention that you are leaving the country and supply a foreign address at the Town hall. If you forget to deregister, you will continue to be viewed as a domestic taxpayer and possibly miss out on the extra refund entitlements.
If you want to know more about your possibilities to reduce tax liability, we will gladly advise you to make sure you receive the maximum refund. Our tag line, after all is: Untaxing taxes.
Free tax review
To make sure you don’t let a refund opportunity slip, as well as to introduce you to our range of services, we offer a free tax scan. An email with your annual salary statements to email@example.com with ‘Free tax scan' in the heading is enough to make use of this offer.
After checking your situation, a consultant will advise you with opportunities and provide a quote for submitting your tax return or for further advice. Established in 1986, J.C. Suurmond & zn. Tax consultants is a Dutch tax consultancy office, established since 1986. From the start, there has been an international perspective on our tax services as a very large proportion of our clients have been expats.
Sometimes, your employer could be taking care of your tax returns. Employers usually hire a large accountancy office to work. Maybe you are satisfied with this often free service and relieved that you do not have to do it yourself. But it's possible that you might be dissatisfied with this arrangement. Expats often feel that they get a 'one size fits all' service from employers and experience that the accountancy company is only working in their employer's interest and not theirs — especially regarding having no knowledge of what tax returns they are entitled to. To avoid this, it is very worthwhile to get a second opinion from a tax advisor specialising in expat tax returns. You can inquire about the free tax review offered by J.C. Suurmond & zn. Tax consultants and avail of our help. This will give you more security and maybe even more tax benefits.
Client and result-focused
We focus on our clients' interests, so they can be assured of a proactive and personal service when they come for tax advice. This means that clients receive a better service for less money than they might receive at very large tax consultancy office.
Contributed by J.C. Suurmond & zn. Tax Consultants
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