The Dutch income tax system explained

The Dutch income tax system explained

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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.

Partners

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.

Tax fines

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).

As of July 1, 2015, the Dutch tax office has increased the penalties for undeclared income. The penalty for voluntarily declaring hidden income, wealth or inheritance has risen from 30 to 60 per cent. Hidden income that is discovered by the Belastingdienst risks a fine of 300 per cent. - See more at: http://www.iamexpat.nl/expat-page/official-issues/taxation/dutch-tax-system #sthash.MbUHqOOH.dpuf
As of July 1, 2015, the Dutch tax office has increased the penalties for undeclared income. The penalty for voluntarily declaring hidden income, wealth or inheritance has risen from 30 to 60 per cent. Hidden income that is discovered by the Belastingdienst risks a fine of 300 per cent. - See more at: http://www.iamexpat.nl/expat-page/official-issues/taxation/dutch-tax-system #sthash.MbUHqOOH.dpuf
As of July 1, 2015, the Dutch tax office has increased the penalties for undeclared income. The penalty for voluntarily declaring hidden income, wealth or inheritance has risen from 30 to 60 per cent. Hidden income that is discovered by the Belastingdienst risks a fine of 300 per cent. - See more at: http://www.iamexpat.nl/expat-page/official-issues/taxation/dutch-tax-system #sthash.MbUHqOOH.dpuf

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.


Government

The Ministry of Finance provides details of the Dutch Government's financial policies including the 30 percent facility at www.minfin.nl (in Dutch), or visit www.government.nl (in English).

Customs 
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'.

 

Expatica / Arjan Enneman, Managing Director Expatax BV

Expatica Ask the ExpertOur tax experts are available to answer your tax-related questions on Expatica's Ask the expert section under the 'Tax' category. 


Updated 2016.

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7 Comments To This Article

  • delmargeary posted:

    on 29th August 2016, 08:32:40 - Reply

    Just what I was looking for. Thanks for clarifying my confusion. 

  • George posted:

    on 3rd March 2016, 12:24:34 - Reply

    Could someone please clarify the deadline for the M form? I moved to NL towards the end of 2015 and was paid some salary from a Dutch employer who advised me that I should get some sort of tax refund.
    I would like to know by when I should submit the M form and if I can do this myself or should I hire an advisor. Many thanks!

    [Moderator's note: You can also post questions on our Ask the Expert free service.]

  • Brunno posted:

    on 24th September 2015, 20:35:20 - Reply

    Do university students from the EU who work 1 job pay tax too?

    [Moderator's note: Please post questions on our Ask the Expert service]

  • Anton posted:

    on 1st September 2014, 00:07:19 - Reply

    Netherlands ranks no.6 worldwide, highest income tax rates (that even excludes the obligatory social security contribution taken from your salary)

    http://www.tradingeconomics.com/country-list/personal-income-tax-rate

    You will see that Sweden ranks higher, with around 60% salary tax...however, in reality NL still is a worse place to live in, because NL charges 1,2% tax on your bank balance, each year again and again (pay it 10years and you effectively hand over 10,2% away from your bank balance to the tax man) while Sweden does not tax your bank balance. Also, NL charges up to 40% Inheritance tax upon death, while Sweden does not.

    Unless you are a nett receiver (eg on welfare), be ready to be paying up to 100% from your income through a variety of dutch taxes.
  • Silvere posted:

    on 22nd July 2014, 18:55:15 - Reply

    Sorry but this is not very well explained. I was hoping to get to know how much tax one is likely to pay. I have found the information on wikipedia!
  • Emma Yates posted:

    on 4th April 2014, 09:57:19 - Reply

    Hi, i moved out of my property on which i have a mortgage,, and now find i need to get permission from the municipality (?) to rent it out. Can you please tell me how to do this when i am not in the country? Thanks, Emma

    [Moderator's note: You can also post questions on our Ask the Expert service]

  • Alex posted:

    on 14th March 2014, 13:48:58 - Reply

    My advice would be to not go near BDO. They will take a lot of money form you and do a very c*** job on your tax returns.