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:

  1. Those who legally reside in NL are regarded as: ‘resident taxpayers’
  2. Those who do not officially reside in NL are considered: ‘non-resident taxpayers’
  3. Under certain conditions, however, ‘non-residents’ will also be treated as resident taxpayers
  4. 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
  • Employment
  • 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
  • Liechtenstein
  • Norway
  • Iceland
  • Switzerland
  • Bonaire
  • Sint Eustatius
  • Saba

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:

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:

2018 Income Wage
Tax
Social Security Total
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

Tip

Levy Rebates in NL

Under Dutch tax law, there are a number of levy rebates available. These apply to both tax and general insurance contributions in NL. You might, for example, be eligible for the general levy rebate:

  • 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.

Side Note

  • 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

Non-Resident Taxpayers

  • 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

Side Note

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.

Recently Posted on XPat.nl

If you’re an expat living and looking for work in the Netherlands then there are some vital differences you should know about in regards to your job applications. In the Netherlands, as with most places in Europe, the norm is a CV rather than the resume which is commonly used in the United States amongst … Continue reading "The Difference Between a Resume and a CV"
Now as an expat you have probably already noticed that the Dutch take their biking pretty seriously. They’re everywhere! Maybe best not to go into all the details of why the Dutch love their two-wheeler so much - but actually, most of the time, it is easier to get anywhere in the Netherlands by bike … Continue reading "How to Insure your E-bike"
Obviously, the decision to move to the Netherlands is not one to be taken lightly. A lot comes into play. Once you have decided to finally relocate, you could probably use some help preparing for your big move. A lot of companies have found a way to cater to the needs of expats coming to … Continue reading "Help me move to the Netherlands!"
People love to go into the countryside. Hiking, walking, running, cycling. It becomes more and more popular. So do outdoor brands. Especially one that helps keeping nature intact. And you can do also. We will explain this. Outdoor weekends and holidays are popular. After working fulltime at the office people want to go out. Mostly … Continue reading "Go outdoor, go Fjällraven! (and this is why)"
It is that time of year again; the new and annually-updated version of The Holland Handbook is here and ready to be enjoyed! Not only that, but this is the 22nd edition! More than twenty years ago, a modest group of three people sat around a table to discuss the possibility of creating a handbook … Continue reading "The Holland Handbook 2022"
Gardening has become a popular hobby in the Netherlands. It's not surprising, considering how green and lush it is outdoors! But what if you want to have plants in your home or office with little or no access to natural light? This guide will teach you everything you need to know about indoor gardening in … Continue reading "Your guide to Indoor Plants in The Netherlands"

What are the Benefits of Having Sim ...

When you have just moved to the Netherlands, you will have to take care of ...

Economical, Not Stingy

Most of the work I do consists of giving 1 or 2-day workshops and ... And to ‘ease’ the delegates into to the subject of culture, I start talking about ...

Getting Connected in the Netherland ...

There are several criteria that are important to consider when choosing a mobile phone service ...

The Media in the Netherlands

As an expat, you have a wide range of media outlets on offer to you ...

Dutch Gardens and Curtains

There are some specific and quintessential Dutch traditions, surrounding gardens and curtains in the Netherlands ...

Pets in the Netherlands

The Dutch truly love their furry friends, and have a unique way of treating them ...

Recycling & Waste Management in the ...

You might find that there are more rules and regulations surrounding recycling and waste management ...

Safety in the Netherlands

In general the Netherlands is a very safe country to live in. Drug-related crime ...

Household Help in the Netherlands

Getting some household help in the Netherlands can make your hectic life a bit more ...

Dutch Food

You will be spoilt for choice when it comes to food in the Netherlands. For ...