The tax system in the Netherlands
Taxation
Taxes in the Netherlands are relatively high, like in much of Europe. The government services are fairly good in return. Social Security contributions are included in your taxes.
You are eligible to be a resident taxpayer if you live in the Netherlands. You are considered a non-resident taxpayer if you live outside of the Netherlands and earn income from the Netherlands that is subject to Dutch taxation. Dutch income tax will apply in both situations.
The Ministry of Finance is responsible for the Dutch tax office (Belastingdienst). Taxes and social security contributions are gathered by the Belastingdienst. Government expenses are mostly funded by tax income. Subsidies for housing, childcare, healthcare, pensions, and social security benefits are included in this.
The Dutch tax system divides various forms of taxable income into the following three categories, each with its own rate:
1: Taxable income from a business, employment, and homeownership, including salaries, pensions, social security payments, and the market value of the owner-occupied real estate. The act that towns use to calculate the value of homes and properties is known as the WOZ value (Waardering Onroerende Zaken – Valuation of Immovable Property).
2: Taxable income from substantial interest
3: Taxable income from investments and savings
When calculating their advantages from investments and savings made in the Netherlands, non-resident taxpayers may claim a basic allowance in tax box 3. In some circumstances, this may result in a reduction in their tax rate.
The Belastingdienst automatically deducts a portion of your monthly salary. You must, however, file a tax return (belastingaangifte) at the end of each year and disclose your income and assets. You’ll get a final tax notification and, occasionally, a tax refund.
The national government imposes many types of direct taxation, including the following:
- income tax
- corporate tax
- inheritance and gift tax
- transfer tax
The Dutch government also levies several indirect taxes, such as the ones listed below, in addition to direct taxes on individuals:
- value-added tax
- excise duty
- taxes on legal transactions
- environmental taxes
- tax on passenger’s cars and motorcycles
- import duties
- consumption tax for non-alcoholic beverages and other products
- tax on heavy goods vehicles
Resident taxpayers
It doesn’t matter where in the world you earn your money if you are a resident taxpayer in the Netherlands because you will be taxed on all of it. Any company, job, or investment earnings or income in the form of periodic benefits are deemed taxable by the tax office.
Non-resident taxpayers
If you are a non-resident taxpayer in the Netherlands, all income that may be taxed there will be the only income subject to taxation. This includes income from employment, running a business, receiving regular benefits, owning Dutch real estate, or owning a portion of a Dutch corporation. Some money received outside of the Netherlands, however, can also be subject to taxation.
Partial non-resident taxpayers
You can choose the partial non-resident taxpayer status if you move to the Netherlands and are qualified for the 30% ruling benefit for new hires.
You are regarded as a non-resident taxpayer for some income tax purposes if you hold this status. In essence, you pay less tax in the Netherlands if you choose this.
The 30% ruling
The 30% ruling is a tax break for foreign workers who provide unique capabilities to the Netherlands. The financial advantage is determined using your gross annual wage. 30% of this total is exempt from income tax. Additionally, all of your bonuses, holiday allowances, and other benefits—outside of pension premiums—are covered by the decision.
Before you begin the application process, your employer must concur that the 30% ruling applies to your circumstance, which is coordinated and supervised by the Belastingdienst.
The 30% ruling’s length was cut from eight to five years in January 2019.
Income tax
In addition to the wage tax that is routinely taken from your gross paycheck each month during the year, you’ll likely need to file a yearly income tax return.
Other parts of your financial situation will be considered on your tax return, including a mortgage, a partner’s income, savings, investments, tax deductions for things like medical expenses, etc.
Applying the various Dutch tax rates to the different taxable incomes shown in the boxes yields the total amount of tax due. One or more tax credits are then subtracted from the computed amount. Dutch income tax estimates are outlined by the government.
The three income boxes
- Box 1: income from profits, employment, and homeownership. In 2022, earnings up to €69,398 are taxed at 37.07%, while earnings over the limit are taxed at 49.5%. All workers have a general tax credit of €2,888.
- Box 2: income from substantial interest is taxed at 26.9%.
- Box 3: income from savings and investments are taxed at a maximum 31% tax rate. Taxpayers have a tax-free capital limit of €50,000.
The amount of tax you must pay and any tax refunds may change if you have a tax partner, such as a spouse, a registered partnership, or someone living at your address.
For the purposes of the turnover tax, independent contractors and self-employed professionals are considered entrepreneurs (VAT). As a result, they must collect and remit VAT on their income. You can apply for the small business tax scheme if your income is minimal (kleineondernemersregeling). Journalists and translators, for example, are exempt from the VAT.
Self-employed income tax
For income tax reasons, an entrepreneur who is required to charge and pay VAT on their revenue will not necessarily be regarded as such. You must meet a number of requirements to qualify for the latter. You are not eligible to claim some tax deductions available to business owners if you don’t meet these requirements and are not employed by your client. You may, however, deduct costs associated with your job.
Digital tax returns must be filed when beginning a business. Entrepreneurs and citizens both must file income tax returns. Both “My Tax and Customs Administration” (Mijn Belastingdienst) and the “Entrepreneur login window” (Ondernemers) allow you to submit digital tax returns; both are, however, only available in Dutch.
Tax on property and wealth
Real estate tax, also known as onroerendezaakbelasting, is based on the deemed rental value of a property and is levied in the Netherlands. WOZ-waarde, or immovable property tax, is the name for this.
The Dutch property tax rate is set by each municipality and typically ranges from 0.1% to 0.3% of the property value. The municipality invests these revenues in community projects, educational initiatives, and the upkeep of public spaces like playgrounds and parks.
Additionally, a transfer tax must be paid when purchasing a home or other property (overdrachtsbelasting). This applies if you are the owner of any of the following: real estate, property rights, or ownership interests in immovable objects like buildings.
If you rent out a property that you own in the Netherlands, the WOZ value of the property is taxed, less the mortgage balance. Box 3 is where you report any income from savings and investments in the Netherlands and is where rental income is taxed. You can no longer deduct the interest on your mortgage if you decide to rent out your home. Not all assets fall into this category if you live outside of the Netherlands while renting a Dutch house.
Advice on taxes in the Netherlands
Whether you’re a recent immigrant or have lived in the Netherlands for a while, understanding the Dutch tax system can be challenging. If you are subject to any additional tax mechanisms, such as the 30% ruling or freelancer taxes, this is especially true.
Fortunately, the Netherlands has many tax consultants who are tolerant of expats. These offer guidance and information in English or other languages and can assist with a variety of tax-related difficulties. The following tax professionals in the Netherlands cater to expats:
Suurmond Tax Advisors
HBK