The Netherlands has some very high taxes, particularly for resident individuals although there are a few tax breaks available for expats. On the other side of the coin, a number of multinational corporations transfer profits via the Netherlands to mitigate taxation in other jurisdictions.
This article offers a brief overview of taxation in the country for individuals. Due to the complex nature of tax matters as well as the language barrier, you are strongly urged to seek qualified professional help when doing your tax return.
Register – Residents of the Netherlands need to have a BSN (burgerservicenummer – citizen service number) which is the fiscal number roughly equivalent to the national insurance number in the UK, social security number in the US or tax file number in Australia. The number is also a general identifier required for other government services and healthcare. Also see 10 essential steps for expats arriving in Netherlands
Dutch Tax Department – The Dutch tax revenue department is known as the Belastingdienst (Belasting=tax, dienst=service). It sends most standard correspondence in a blue envelope – however there are long-term plans to phase this out and go to a digital-only platform. Most communication and information is in Dutch; tax office staff will generally only speak Dutch, even to foreign clients! There are some explanatory notes and forms in English available; there is some limited English info on its website here; the free telephone tax line for residents (0800-0543) is only available in Dutch.
Dutch Tax Return – If you are working or hold investments in the Netherlands, you may be invited/required to complete a Dutch tax return (aangifte) which covers the calendar year. Tax returns can be submitted online either by an accountant or by an individual using DigID, the online identity management platform run by the Dutch government. Expect to pay €500-600 for an accountant to prepare a standard Dutch tax return.
Depending on your situation, you can either be fully resident in the Netherlands, partially resident or non-resident for tax purposes. Most people living and working in the Netherlands will be regarded as resident. Being resident means you are taxed on your worldwide income and assets, however you are allowed to use the standard allowances. Those living outside of the Netherlands but receiving a Dutch taxable income will normally be non-resident, although they can deem themselves resident.
If you have moved to or have left the Netherlands during the tax year you will have to fill in the M Form tax return. In other special cases, non-resident taxpayers need to file the C Form; those not living in the Netherlands but deemed resident taxpayers should file the P form. Depending on the deadline date of your tax return, you (or your accountant) can ask for a personal extension of a few months. The deadline for a standard tax return is 1 April.
In a nutshell, the standard Dutch tax return has 3 category boxes for different types of taxable income. Box 1 applies to employment income and home ownership, Box 2 applies to income from a substantial interest in a company and Box 3 to worldwide savings and investments held.
Dutch Tax Rates – The Netherlands has some of the highest income taxes in the world – progressive tax rate bands for 2018 apply which include national insurance contributions:
0 to €20,142 – 36.55% (8.9% tax + 27.65% national insurance)
€20,142 to €33,994 – 40.85% (13.2% tax + 27.65% national insurance)
€33,994 to €68,507 – 40.85% tax
€68.507 and higher – 51.95% tax
In Europe only Belgium, Denmark, France, Portugal and Sweden have a higher top rate of tax. An employee earning €100,000 would effectively have to pay around €42,600 in taxes before any tax credits are applied. For a rough idea of your net salary check this tax calculator. Lower income taxpayers get a personal tax credit of around €2,250; sole traders (zelfstandigen zonder personeel or zzp) also get a tax deduction of €7,280.
Family – Married and/or co-habiting couples can be fiscal partners (under certain conditions) which can make the division of income and deductibles more efficient for your combined tax return. There are various tax credits available for those who have children.
30% Rule – If you are recruited or transferred from another country for a position in the Netherlands you may qualify for the 30% ruling – this is where only 70% of your salary will be taxed, effectively lowering the tax rate. You must have “specific expertise” in your field and a minimum salary requirement for the position will apply. To get this ruling both you and your employer must file a detailed application to the tax office.
Redundancy Payments – If you lose your job any redundancy payment is regarded as income – so you will be taxed at your highest tax rate band. In some cases the tax could be mitigated using longer term insurance arrangements.
Wealth Tax – The Netherlands has a wealth tax (box 3) on savings, property and investments where profits are taxed at 30%. The tax is paid on a fictitious profit which is weighted depending on the amount of declared assets. There is an exemption on the first €30,000 for individuals and €60,000 for fiscal partners. For the 2018 tax year the taxable tiers are for assets €30,000-€70,800, €70,801-978,000 and over €978,000. Effective rates rise progressively for each successive band – around 0.61%, 1.3% and 1.6% respectively. This wealth tax means that there are no capital gains taxes for investments.
Corporate Taxes & Dividends – Corporate tax rates are 20% for the first €200,000 and 25% on the remainder. Dividends are taxed at 15%. Private limited companies are known as bv or besloten vennootschap.
VAT – There is a Value Added Tax called the BTW (Belasting Toegevoegde Waarde) of 21% on most goods and services and a low tariff of 6% for food, medicine and other selected items. If you run a business (ondernemer) then you will need to charge BTW to your clients; on the other hand you can also reclaim any BTW from your expenses. VAT returns can be done online (usually quarterly) through the tax department’s web portal. Note, from 2019 the low tariff BTW will rise to 9%.
Tax Refunds – If you have worked in the Netherlands only part of the year then you may be entitled to a tax refund, due to overpayment of income tax and national insurance contributions. You can request a refund directly from the tax office or during the filing of a tax return.
If you live outside the EU you can request a VAT refund on any goods bought whilst in the Netherlands subject to minimum purchase prices.
Home Owners – Dutch tax residents who own and live in a property with a mortgage can get tax relief on the mortgage interest payments. The future status of this relief is under discussion. Property owners are also liable to pay annual property taxes (OZB, onroerende zaakbelastingen) to the local municipality which is based on the deemed value of the immovable property (known as WOZ, wet waardering onroerende zaken).
Death Taxes – Should you die whilst resident in the Netherlands then your entire estate will have to pay inheritance taxes subject to certain exemptions. Rates vary between 10% and 40%.
Please note, this article is for information purposes only so we cannot provide any personal financial advice. Tax laws are subject to change so please speak to a qualified financial professional.