Netherlands tax guide: Tax in the Netherlands for expats
Certain expats are entitled to Dutch tax benefits; this guide to tax in the Netherlands explains the Netherlands' tax rates, the Dutch tax system and tax benefits for expats.
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. Different rules apply to self-employment taxes in the Netherlands.
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.
This guide to tax in the Netherlands explains:
- Are you a Netherlands tax payer or non-resident taxpayer?
- Tax in the Netherlands: Dutch tax rates and Dutch income calculator
- Deadlines for paying taxes in the Netherlans
- Dutch tax credits and allowances
- Mortgages and Dutch tax implications
- Contacts for tax in the Netherlands
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). Read more in our guide to rules for non-resident taxpayers.
Each year you earn income in the Netherlands, you will typically be required to file a Dutch income tax return and pay taxes in the Netherlands.
The Dutch tax 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 a 25 percent rate.
- Box 3: Taxable income from savings and investments at a 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. Tax is relative to assets held on the 1 January each year.
Until 2016, the taxable rate in box 3 was calculated based on a fictitious profit of 4 percent (multipled by a tax rate of 30 percent, thus equalling 1.2 percent of taxable equity). As of 2017, income tax under box 3 will fall into three brackets, with taxes based on fictitious profits of 1.63 percent and 5.39 percent depending on your income level.
|Savings and investments||Taxed at 1.63 percent||Taxed at 5.39 percent|
|Up to EUR 75,000||67 percent||33 percent|
|EUR 75,000–975,000||21 percent||79 percent|
|EUR 975,000+||0 percent||100 percent|
Payable tax = tax base x percentage fictitious profit x 30 percent (tax rate)
Each resident in the Netherlands is entitled to a tax-free capital threshold, set at EUR 25,000 in 2017 for an individual (or EUR 50,000 for fiscal partners); pension-age residents are typically allowed an extra threshold of 50 percent up to a certain amount. Certain assets are also exempt, for example, moveable assets, such as a car, and green investments up to EUR 57,385 (or EUR 114,770 for partners).
As of 2017, non-resident taxpayers will also be allowed to claim a basic allowance in tax box 3 when determining their benefits from Netherlands-based investments and savings.
Dutch tax rates
There are many variables that influence your tax in the Netherlands. However, as an example, below are the basic rates of income tax in the Netherlands in 2017 for those below retirement age:
- Up to EUR 19,982: 8.9 percent (EUR 1,778)
- EUR 19,982–EUR 33,791: 13.15 percent (EUR 1,816–3,594)
- EUR 33,791–EUR 67,072: 40.80 percent (EUR 13,579–17,173)
- EUR 67,072+: 52 percent
On top of this, Dutch social security tax is paid at a rate of 27.65 percent in 2017, down from 28.15 percent in 2016 (or 9.75 percent for pension-age residents). To get an idea about your individual income tax in the Netherlands, you can use a Dutch income tax calculator.
Calculating your tax in the Netherlands
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. The government provides instructions on Dutch income tax calculations.
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. You can read more in our guide on how to do your income tax return in the Netherlands.
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).
Everyone is entitled to a general tax credit, which income-based; the maximum tax deduction in 2017 is capped at a maximum of EUR 2,254 for low-income earners, gradually decreasing (at a reductino rate of 4,787 percent) to zero for high-income earners (above EUR 66,726); for state-age pensioners, the maximum credit is EUR 1,151. If you are employed, this will be automatically credited to your tax balance by your employer.
You may be additionally entitled to other Dutch tax credits, for example, the single parent's tax credit or an old-age tax credit (EUR 1,292). You can find out if you are entitled to any social benefits using the government's online tool (in Dutch).
The Netherlands' 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.
Labour tax credits are also granted to residents in the Netherlands who earn income from:
- wages from employment
- trade or business activities
- any other form of activity.
Similar to general tax credits, the maximum labour credit in 2017 for low-income earners starts at EUR 3,223 (or EUR 1,645 for retirement-age residents), decreasing at a reduction rate of 3.6 percent to zero credits allowed on income more than EUR 121,972.
Taxes in the Netherlands for 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.
The 30 percent ruling 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. More is explained in our guide to the Dutch 30 percent rule.
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).
Inheritance and gift taxes in the Netherlands
Residents in the Netherlands may also be subject to Dutch inheritance tax or gift tax, although in some cases foreigners can opt to apply the inheritance law of their home country. Read more in our guide to inheritance tax in the Netherlands, Dutch inheritance law and Dutch wills.
Dutch 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).
Tax payers who corrected an 'inaccurate tax return' within two years of submitting it previously got off with a warning. However, in 2017 the Dutch government announced plans to abolish the voluntary disclosure scheme in place of imposing a fine of 120 percent of tax revenue on anyone found to have illicit savings abroad or in the Netherlands. Other measures were also proposed that will increasingly allow more transparency and reduce tax evasion. The government will discuss the proposals this year.
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.
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'.
Click to the top of our guide to tax in the Netherlands.
Our tax experts are available to answer your tax-related questions on Expatica's Ask the expert section under the 'Tax' category. Updated with the help of Arjan Enneman, Managing Director Expatax BV.
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