Taxes are always complicated. If you have moved to the Netherlands from another country they can be especially confusing! Many expats carry out business, and therefore earn an income, internationally. This makes what they get taxed on, and by whom, a complex matter. In order to figure out your own personal tax liability, your residency status and sources of income must be examined in detail. When it comes to which refunds and rebates you are eligible for then your relationships, your benefits and your country of origin will all come into play too. Ultimately, your tax liability will be a cocktail of all these variables! We have gone over which taxes are owed under which circumstances, in the Netherlands, on this page.
Your Residency Status in NL
As we said, your tax liability in the Netherlands will depend on your residency status:
- Those who legally reside in NL are regarded as: ‘resident taxpayers’
- Those who do not officially reside in NL are considered: ‘non-resident taxpayers’
- Under certain conditions, however, ‘non-residents’ will also be treated as resident taxpayers
- Expats who benefit from the 30%-ruling may opt to be treated as ‘partial non-resident taxpayers’. We will explain the potential advantages of having this status later on
The tax you have to pay in NL depends on which one of the above categories you fall into. So, let’s go over the particulars of your residency status now:
Are you a Resident of the Netherlands?
Under Dutch law, the question of where a person officially resides is decided ‘according to his or her circumstances’. For you, as an expat, this means that the country with which you hold the closest ties is considered your official place of residence. The following matters are taken into consideration, to determine which country you are most closely tied to:
Taxes and Residency in NL
1. Resident Taxpayers in the Netherlands
If you are a resident taxpayer of the Netherlands, you will owe income tax on your entire, worldwide, income:
- In principle, it makes no difference where in the world you earn your income
- Any business income, employment income, income in the form of periodic benefits and notional investment income is considered taxable!
2. Non-Resident Taxpayers in NL
If you are a non-resident taxpayer in the Netherlands, you are only liable to pay tax on income you earn from certain sources. This means that non-resident taxpayers in the Netherlands have limited tax liability. The main sources of a non-resident taxpayer’s taxable income are likely to be:
- Running a business
- Income from real estate in NL
- Periodic benefits
- A substantial shareholding in a Netherlands company
- Income earnt outside of the Netherlands is also, in principle, taxable
3. ‘Qualified’ Non-Residents, Treated as Resident Taxpayers in NL
You are considered to be a ‘qualified non-resident taxpayer’ if you live in:
- An EU country
- Sint Eustatius
Benefits for Non-Resident Taxpayers
As a qualified non-resident tax payer, you must pay taxes in the Netherlands on more than 90% of your worldwide income. If you do this, you will be entitled to the same perks as a resident of the Netherlands. These include:
- Deductible items
- Tax credits
- Tax-free allowances
- The same conditions apply to your partner
If you pay tax on less than 90% of your worldwide income in NL, you will not be able to benefit from the advantages listed above. You will, for example, be unable to:
- Deduct interest on the loan for an owner-occupied home, on your tax return
- Have official resident taxpayer status
4. Partial Non-Resident Taxpayers
You only have the option to be treated as a partial non-resident taxpayer in the Netherlands if you benefit from the ‘30%-ruling’. As a non-resident taxpayer:
- You are considered a resident of the Netherlands in terms of ‘box 1’. This is a category of Dutch income tax. We will cover ‘tax boxes’ in the section below
- You will, however, be treated as a non-resident in boxes 2 and 3. These boxes pertain to income earned from work, property and shareholding
- Essentially, sometimes being classified as a resident, and sometimes as a non-resident, can save you money in NL
Income Tax Boxes in NL
In the Netherlands, income tax is organized into three categories, or ‘boxes‘. Each box relates to different sources of income. As we explained above, it is your residency status that dictates which boxes of taxes you will have to pay:
Box 1: Income from Work and Home
This box refers to income that comes from the following sources:
- Social security benefits
- Business income
- Periodic payments. For example, the alimony you receive
- Income from home ownership. This is referred to as ‘eigenwoningforfait‘ in NL
- Deductibles for which you have to pay less. For example, if you receive mortgage interest
- Alimony payments
The amount of tax you need to pay on the taxable forms of income listed above, is calculated according to progressive Dutch tax rates. The table below illustrates this:
|Bracket 1||up to € 20,142||8.90%||27.65%||36.55%|
|Bracket 2||€ 20,142 – € 33,994||13.20%||27.65%||40.85%|
|Bracket 3||€ 33,994 – € 68,507||40.85%||40.85%|
|Bracket 4||€ 68,508 and more||51.95%||51.95%|
Box 2: Income from Substantial Shareholding
The income you make off shares in a Dutch company will be taxed at 25%, if:
- You own at least 5% of the shares in said company, or
- You own at least 5% of the shares in a similar, foreign company that is limited by shares
- This rule still applies if you have joint shares in a company with, for example, your partner
Box 3: Taxable Income from Savings and Investments
In Holland, you will be taxed a notional amount on the income you accrue from your investments. That is, as opposed to being taxed an amount based on the income you gain from them:
- In 2018, this notional income is based on a combined percentage
- The percentage will be between 0.36 and 5.38%
- How much the percentage will be exactly depends on the total value of your assets, after the deduction of debts and a personal allowance of € 30,000
- The tax rate will be 30%
- If you benefit from the 30% ruling, you will not have to declare all the assets that fall under box 3
Now, you will hopefully have an idea of how much tax you will have to pay, and upon which sources of income you will have to pay it. Next, we’ll cover some of the other tax-related matters that apply to expats in NL. There are, for example, certain ways in which you can benefit from the Dutch Tax system, through partnerships, refunds and rebates.
Fiscal Partners in NL
In years gone by, couples were free to choose whether or not they wished to become 'fiscal partners'. This has changed. Today, Dutch law decides if and when a couple can be considered a 'fiscal partnership'
Benefits of Fiscal Partnership
In the Netherlands, it is possible for fiscal partners to allocate their common sources of income, and deductible items, to one another’s tax return. Here’s how it works, and why it’s worthwhile:
- Common sources of income and deductible items consist of, for example, mortgage interest for a principal place of residence, medical expenses or study costs
- These can be re-allocated in a way that allows the partners to reap the maximum financial benefit from them
- Without fiscal partnership, certain items could end up being deducted against lower tax rates
- This can result in lower refunds
- Equally, certain levy rebates could be reduced
Do you have a Fiscal Partner?
In the Netherlands, married and registered couples are automatically considered fiscal partners. Unmarried couples who are living together are only considered fiscal partners if they are registered at the same address with the municipal registration office. In addition, they must meet at least one of the following conditions:
- Have a civil partnership agreement. This must have been drawn up by a civil law notary. This partnership contract must include a mutual care stipulation
- Have a child together
- Jointly own their principal place of residence
- Be partners in a pension scheme
- Have been fiscal partners the previous year
In Holland, partners are not free to choose whether or not they wish to become fiscal partners. Whether they are or not is determined by Dutch law.
Partnership to Fiscal Partnership
The exact date on which two people become fiscal partners varies in the Netherlands:
- If you and your partner fulfill one of the aforementioned conditions during the course of the fiscal year, you will automatically become fiscal partners on the date you meet said condition
- You and your partner will be considered fiscal partners once you have bought a house together, provided that you were living with one another before purchasing your joint home
- If you and your partner become fiscal partners partway through a fiscal year, you can choose to have this status for the entire year
- Had you and your partner been fiscal partners throughout the preceding year, you will automatically become fiscal partners on January 1 of the following fiscal year
Levy Rebates in NL
- The general levy rebate has been created for those who either receive income from employment or receive a government benefit
- If wage tax is withheld over either of these payments, this will be taken into account
- Even if you do not have an income from either of the aforementioned sources, this rebate will still be available to you if you have a fiscal partner who pays taxes in the Netherlands
- Your partner must also pay contributions towards Dutch insurance schemes, in order for you to be eligible to receive the rebate
- In order to apply for it, you must submit a request to the Dutch tax authorities
Tax Refunds in NL
In the Netherlands, the tax year is equivalent to the calendar year. When it comes to an end, the Dutch tax authorities may invite you to file an income tax return. You could be eligible for a tax refund if, for example, you:
- Did not work in the Netherlands for the entire year
- Are eligible to claim certain deductions
If you did not receive an invitation from the tax authorities, you are still allowed to file a tax return yourself. You also have the right to contact a qualified tax advisor to assist you, if you would like some guidance.
Claiming a Tax Refund
You have the option of claiming a tax benefit you are owed, from deductibles like your mortgage interest, before the final income tax bill is distributed. The procedure runs as follows:
- Request that your tax inspector pays your tax refund in advance, during the tax year
- If your request is granted, your inspector will create a ‘negative preliminary tax bill’
- A tax refund will then be transferred to you directly, by the tax authorities
- It should come into your Dutch bank account, on a monthly basis
Double Taxation in NL
Resident Taxpayers: International Treaties
As we explained earlier, expats who are classified as residents of the Netherlands, have to pay tax on their worldwide income. If you are a resident tax payer, beware the hazard of double taxation!
- Income you earn abroad may well be subject to taxation in the country in which it is made, as well as in Holland
- If the Netherlands has entered into a treaty with the foreign country in which you have amassed some income, said treaty will contain clauses that dictate how much tax you owe, and to whom you owe it
- Most of these treaties will declare that any income you earn from employment in the Netherlands should be tax-exempt in the Netherlands
Preventing Double Taxation
This regulation will be upheld, providing that all the following conditions are satisfied:
- You are present in the Netherlands for a period, or periods, not exceeding a total of 183 days, in any 12-month period, or in a fiscal year
- Remuneration is paid to you by, or on behalf of, an employer who is not a resident of the Netherlands
- Said remuneration is not bestowed by an establishment or representative of an employer, that is permanently located or resides in the Netherlands
If the above conditions are not met, your employment-income will be taxable in the Netherlands.
- If you carry out work in the Netherlands via a foreign employment agency, you might not meet the ‘183-day condition’
- The material relationship between you, the foreign employment agency and the Dutch recipient will have to be taken into consideration
Resident Taxpayers: Lack of International Treaty
For countries with which the Netherlands has not entered into a tax treaty, there is a unilateral arrangement. It will often be along the following lines:
- Income earned abroad is exempt from taxation in the Netherlands
- It will, however, be taken taken into account when the tax rate on a taxpayer’s other income is being calculated
- This income will be taxed according to the ‘normal’ tax rules in NL
- Any income a taxpayer receives from a property abroad will be taxed in the country in which the property is located
- As a non-resident taxpayer, you will owe tax in your country of residence on income earned in the Netherlands
- Again, this puts you at risk of double taxation
- You will be subject to the same rules as resident taxpayers in this regard
- Therefore, your tax liability will be dependent upon whether or not the Netherlands has entered into a treaty with the country in which you legally reside
U.S. Taxpayers in NL
If you are a U.S. Citizen, benefiting from the 30%-ruling, and you opt for the status of partial non-resident taxpayer, you will:
- Owe tax in the Netherlands over income earned on working days physically spent in the Netherlands only
- Therefore, it would be advantageous for you to spend a lot of time traveling outside the Netherlands
A lower tax credit may, of course, have a negative impact on your U.S. tax liability. However, it is likely that this will be outweighed by the benefits you will get from following the above points. Please note that this rule does not apply to statutory directors.
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