J.C. Suurmond & zn. Tax Consultants

Let Dutch taxes work for you

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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.

Experienced expats in the Netherlands probably know by now that tax returns must be filed before 1 May. If you are new, note this date and make sure you get it done - and to save yourself some frustration, preferably not on your own.

If you want to take your integration in the Netherlands seriously, you should learn how to let Dutch 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 and emigration, start of employment, purchase or sale of a property and in terms of savings.

Tax and immigration

An obvious, but still sometimes forgotten, situation in which it is likely that you 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. In the following years, you will need to file a regular tax return. Registration, however, is not always favourable—in the case you only stay in the Netherlands for several months, for example. 

Expats in the Netherlands

Start of employment of business

To qualify for the 30 percent ruling—which leaves 30 percent of your net income untaxed—you must be able to prove that you were recruited from abroad by a Dutch employer. That means the contract has to be signed before you start living in the Netherlands. In fact, the requirement is that you to have lived more than 150km away from the Dutch border during the last 16 months.

The Dutch tax authorities are strict regarding this rule, but the term “living” is quite variable; in some cases, it can open up the opportunity to qualify for the 30 percent ruling. For example, if you started working in the Netherlands after studying at university—and while studying, you were still registered in your home country, located more than 150km away—it is worth trying to apply for the 30 percent ruling. You can also ask for a second opinion if the first application is denied. 

If you change jobs, make sure no more than three months pass between the jobs in order to keep the 30 percent ruling.

If you have or start your own company, it is also possible to recruit yourself, your business partner or employees from abroad to ensure that the 30 percent ruling applies for you or them. If your spouse will work for you, this can be especially financially attractive.

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. Rent for expats is usually higher than the monthly cost of buying a house, and the interest rate for mortgages is currently at its lowest in the Netherlands, which makes your monthly expenses lower than if you were renting a house.

For homeowners, mortgage interest is fully tax deductible (on your primary residence), as well as mortgage-related expenses. The maximum tax deduction rate will be gradually limited, but is still advantageous. 

Tax relief can be paid in monthly instalments during the year after filing the tax form for a provisional refund for mortgage relief, requested at the Dutch Tax Authorities. If you move out of the country again, you can rent out the house, 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 return

Savings

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 the savings scheme. If the 30 percent ruling does not apply, it is not possible to opt for partial non-domestic taxation; your worldwide assets are therefore taxable in the Netherlands.

For foreign real estate, double taxation should be requested. The tax-free amount for 2016 is EUR 24,437 per partner. In 2017, this will be increased to EUR 25,000.

Currently the box 3 tax consists of a 30 percent levy over a notional return of 4 percent, which means an effective rate of 1.2 percent on the assets. This rate of 4 percent of income has been heavily criticised in the and for homeowners, mortgage interest is fully tax deductible (on your primary residence), as well as mortgage-related expenses. The maximum tax deduction rate will be gradually limited, but is still advantageous.  surpasses the income. The suggested changes from tax year 2017 provide for different notional income percentages.

The property in which 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 residential property has a value of EUR 1,000,000, and you have no mortgage, the property is not taxed. 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.

Emigration and finalising tax

Also, do not forget to deregister with the city council when you emigrate again from the Netherlands, whether 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.

Dutch tax system

Get a free tax review

To make sure you don’t let a refund opportunity pass by, you can request a free tax review from many reputable tax preparers. After examining your current tax situation, a consultant will provide a quote for submitting your tax return or for further advice.

A free tax scan can also be useful even if your tax return is already arranged by your employer, which is usually carried out by a large accountancy office. Expats often feel that they get a one-size-fits-all service from employers, finding that the accountancy company works primarily for the employer's interest and not theirs—especially in regard to having no knowledge of what tax returns they are entitled to. To avoid this, it is worthwhile to get a second opinion from a tax advisor specialising in expat tax returns.

 

 

J.C. Suurmond & zn. Tax Consultants / Expatica

 
 

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