For purposes of application of the tax laws, it is very important to know whether you are a resident of the Netherlands or not. If you are, you are regarded as a ‘resident taxpayer’; if not, as a ‘non-resident taxpayer’ – though so-called qualified non-residents can also be treated as resident taxpayers. There is a fourth option: if you are benefiting from the 30%-ruling, you may opt to be treated as a partial non-resident taxpayer.
ARE YOU A RESIDENT?
Under Dutch law, the question of a person’s residence is determined ‘according to the circumstances’, focusing on with which country the ties are stronger. This is a question of facts, and in case law – among others – the following circumstances have been considered relevant when deciding on this issue:
- the place where you have your home
- the place where your family (partner) resides
- the place where you work
- the length of your stay in the Netherlands
- other personal ties with the Netherlands, such as (club) memberships, bank accounts, etc.
From this list it can be deduced that the existence of a lasting relationship of a personal nature with the Netherlands is regarded as an important factor when deciding whether or not you are a resident of this country.
If it is determined that you are a resident taxpayer, then you owe taxes over your entire worldwide income, wherever you earn it (tax treaties may determine differently). There are three ‘boxes’ over which taxes are due: income from real estate, benefits, shareholding, etc.; income from substantial shareholding; and income from savings and investments.
- Box 1: In this box, there are four tax brackets, divided into approximately € 0–20,000 (taxed at 37%); € 20,000–33,600 (taxed at 41%); € 33,600–57,600 (also taxed at 41%); and more than € 57,600 (taxed at 52%) (tax percentages are approximate, as they change annually, at least behind the comma).
- Box 2: taxed at 25%.
- Box 3: taxed at 30% over 4% of the assets, creating an effective tax rate of 1.2%.
Taxpayers who (these conditions are not cumulative):
- Are married or registered partners
- Have a civil partnership agreement drawn by a civil law notary, including a ‘mutual care stipulation’
- Have a child together
- Jointly own their main residence
- Are considered partners in a pension scheme
- Are considered partners for tax purposes.
can allocate common sources of income and deductible items – such as mortgage interest for the principal place of residence, medical expenses or study costs – to each other’s tax return in such a way that they can reap the maximum benefit from them.
Contrary to the past, partners are no longer free to choose whether or not they wish to become fiscal partners. The law determines whether they are or not.
As a non-resident taxpayer, you only pay income tax on income from certain sources in the Netherlands, such as: Dutch business income, employment income, income from real estate in the Netherlands and income in the form of periodic benefits, and a substantial shareholding in a Dutch company. In most cases, employment income that you earn while you are physically not in the Netherlands is not taxed here.
Partial Non-Resident Taxpayer
This is only an option if you are benefitting from the so-called 30%-ruling. In that case, you are a resident of the Netherlands for income (and deductibles) in box 1, but you are treated as a non-resident in boxes 2 and 3.
‘Real’ Non-Resident Taxpayer
If you are a non-resident, but you earn your income in the Netherlands and would like to benefit from the available deductibles, then you can choose this option. Be sure you consult a tax advisor before making this decision.
As mentioned earlier, you may find yourself owing double taxes. In order to help you avoid this, several countries have entered into tax treaties with each other. In keeping with most of them, you do not owe taxes over income from employment in the Netherlands if:
- You are in the Netherlands for, in total 183 days (approximately six months) in any 12-month period or in a fiscal year, and
- Your wages are paid by or on behalf of an employer who is not a resident of the Netherlands, and
- Your wages are not borne by a permanent establishment or permanent representative of the employer in the Netherlands.
For countries with which the Netherlands has not entered into a tax treaty, there is a unilateral arrangement. This will often mean that income earned abroad is exempt from taxation in the Netherlands, although it will be taken into account for the purpose of calculating the (progressive) tax rate applicable to your further income, which is then taxed in keeping with the ‘normal’ rules.
For more information about local tax, click here.
Dutch Tax Office: www.belastingdienst.nl
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