The Dutch income tax system explained
Find out whether you need to file a Dutch tax return in the Netherlands, and what taxes apply in the Netherlands.
The Dutch tax system, especially for an expat, is anything but simple.
The Netherlands is a socially conscious country, and you can expect to pay a substantial proportion (up to 52 percent) of your salary to the taxman. But your personal situation (non-working partner, for example), type of work, residency status and other assets and earnings (particularly from abroad) affect your position considerably. In many cases, you will still be filing a tax return in your home country and will be entering the land of double taxation agreements.
For expats, particularly in the year of arrival and the year of departure, filing a tax return may result in a substantial rebate. Tax returns can be completed retrospectively for a period of five years.
Residency status: Are you a resident or non-resident taxpayer?
If you have demonstrable ties to the Netherlands (for instance, you live here, you work here, or your family is based here) you are generally regarded as a ‘resident taxpayer' from day one. As a resident taxpayer you are taxed on your assets worldwide.
If you live abroad but receive income that is taxable in the Netherlands you are generally a ‘non-resident taxpayer'. Non-residents can also apply to be treated as residents for tax purposes (in order to gain access to Dutch deductible items) and an additional category of partial non-resident taxpayers covers those eligible for the so-called 30 percent ruling (see below).
Dutch tax rates: How much tax do you pay?
The box system
Different categories of income are treated differently for tax purposes on the tax return and there are three types of taxable income:
- Box 1: Income from profits, employment and home ownership. This includes wages, pensions, social benefits, company car, and WOZ value of owner-occupied property – maximum 52 percent rate.
- Box 2: Income from substantial shareholding (5 percent minimum holding) at 25 percent rate.
- Box 3: Taxable income from savings and investments at 30 percent rate. Income from property for instance, owned but not lived in as a main residence, is taxed here: not the actual income but the value of the asset (fictitious return: 4 percent taxed at 30 percent = 1.2 percent).
Dutch income tax rates
There are many variables that can influence your tax rates in the Netherlands. However, as an example, below are the basic income tax rates in 2016 for those below retirement age:
- Up to 19,922: 8.4 percent
- EUR 19,922–EUR 33,715: 12.25 percent
- EUR 33,715–EUR 66,421: 40.40 percent
- EUR 66,421+: 52 percent
To get an idea for your individual situation, you can use a Dutch income tax calculator.
Calculating your taxes
The total amount of tax payable is calculated by applying the various tax rates to the various taxable incomes in the boxes. The amount calculated is then reduced by one or more tax credits.
Tax credits and allowances
Everyone is entitled to a general tax credit (income based, maximum EUR 2,103 and minimum EUR 1,366 in 2014) and may be additionally entitled to other credits. The single parent's tax credit (EUR 947 plus a maximum EUR 1,319 under additional conditions).
The general tax credit comprises an income and social security element (to which you are only entitled if you have compulsory Dutch social security coverage). Your employer will take these into account when deducting wage withholding tax but not any other personal circumstances. You claim other allowances and potential refunds when you file your tax return or request a provisional refund.
Where possible, partners are taxed individually but, when only one partner works, the other partner is generally entitled to a refund of general tax credit and deductible expenditure can be apportioned to take advantage of tax credits. Under certain conditions, unmarried couples may qualify as tax partners also, for example if they have a child or own a home together. Details are listed on www.belastingdienst.nl.
30 percent ruling
This is a tax incentive for employees, recruited from abroad who bring specific skills to the Netherlands. It acknowledges the additional expenses incurred by expats (extraterritorial costs) by allowing the employer to grant a tax-free lump sum to cover these costs up to a maximum of 30 percent of the sum of wages and allowances. Applications (completed by both employer and employee) should be made to the Belastingdienst Limburg Kantoor Buitenland in Heerlen.
How to file your Dutch tax return and deadlines
There are many expat financial specialists who can complete your tax forms for you or provide other consultancy services. Other useful information can be found on the Expatica's Ask the Expert service, where financial experts answer readers' questions. The tax office is the Belastingdienst (www.belastingdienst.nl) and their website has information in English. The Ministry of Finance also publishes guides (in English) on the Dutch Taxation System (www.minfin.nl).
In general tax returns are submitted digitally, except the M form which must still be filed on paper (for residents in the Netherlands for part of the year only). The M form must be filed in the year of migration. The deadline for the tax return is 1 April, for the M form 1 July. If you are not able to file before 1 April, you can request an extension.
To file a return, you will need a digital signature or DigiD (www.digid.nl) or the services of a tax consultant. The DigiD is essentially a personal login that you use with all government agencies enabling some transactions (paying parking fines, applying for permits etc.) to be done over the internet. Authentication requirements may vary according to the sensitivity of information in transit.
Mortgages and tax implications
When arranging a mortgage it is important to look at the whole picture: interest, cost of life insurance, savings plan and investment accounts. If you are intending to sub-let, you may need to pay off a substantial part (say 30 percent) of the mortgage to get permission from the lender. When your interest rate comes up for renewal, it is important to check that it is still competitive.
Tax implications include:
- Interest payments are tax-deductible if the property is your primary residence and the loan is used for acquisition of the house.
- There is no capital gains tax in the Netherlands but increases in the value may impact your mortgage relief if and when you use the profits to buy another house in the Netherlands.
- Tax is levied on the deemed rental value of the house (WOZ) determined by the local authority. Expenses in financing the purchase of a house are tax-deductible. (Read more in Expatica's article on tax advantages for expat house buyers).
Paying Dutch taxes online
If you want to file your taxes electronically, or indeed any other official form (local taxes etc.), you need a DigiD registration number. The website www.digid.nl has an English section.
In 2015, the government raised the penalties for undeclared income. Hidden income found by the Belastingdienst risks a fine of 300 percent, while voluntary declarations of hidden income, wealth and gifts/inheritance are fined at 60 percent (up from 30 percent).
Information for tax payers in the Netherlands
Dutch tax authority: Belastingdienst
The website for the Dutch tax authority (belastingdienst) has extensive information in English and downloadable forms and brochures.
There are separate offices for resident and non-resident taxpayers; email queries are not possible:
- TaxLine – 0800 0543. This is the central information line for residents (only Dutch spoken); Monday to Thursday: 8am–8pm, Friday: 8am–5pm.
- Information line for non-resident tax issues – 055 538 5385 or +31 555 385 385. This covers businesses and individuals based abroad who are liable for Dutch tax and also those classified as non-residents for tax purposes.
You will find extensive information in English regarding duties payable and procedures for individuals and businesses at www.douane.nl. If you move to the Netherlands from outside the EU, you can download an application form from the website for exemptions on ‘removable goods'.
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