It is a great gift to inherit anything from a family member or close connection. Unfortunately, however, there is a catch: inheritance tax. It comes as a surprise to many expats that there are Dutch laws surrounding inheritance tax, which apply specifically them. If you understand the ins and outs, you should be able to enjoy your inheritance without any nasty surprises. This page will take you through the basics of when and why you owe it. We also have a few tips on how to ease the financial burden.
It could be helpful to understand the basics of Dutch inheritance law, before you start reading!
When is inheritance tax due in NL?
It is likely that, if the deceased was registered in the Netherlands when he or she died, Dutch inheritance tax will be due on his or her possessions. Yet, confusingly, this is not always the case. Dutch inheritance tax will only be due if the Netherlands was considered to be the deceased’s habitual residence, at the time of his or her death. The following questions are used to determine whether or not it was:
- Did the deceased own a house in the Netherlands?
- Was the the Netherlands the de facto center of the deceased’s activities?
- Did the deceased’s social life take place primarily in the Netherlands?
- How long was the Netherlands considered to be his or her home?
- Did the deceased’s children go to school in the Netherlands?
- Do the deceased’s family live in the Netherlands?
- Did the deceased benefit from the 30% tax ruling?
It is important to note that it does not matter where you live yourself, or where your own estate is located. If the Netherlands was home to the person who has bequeathed you something, then the Dutch inheritance laws apply to you!
Exemptions from Dutch inheritance tax
If you are eligible for an exemption from Dutch inheritance tax, then tax will only be due over a particular portion of your inheritance. You will, however, still be taxed on the remainder of the inheritance that exceeds the exemption. The following people are eligible for the following Dutch tax exemptions:
- The spouse/partner of the deceased: € 638,089 (minus the value of their pension). You can be considered a partner, even if you merely lived with the deceased
- Children, grandchildren, and great-grandchildren of the deceased: € 20,209
- Parents of the deceased: € 47,859. Their exemption will remain this size, regardless of whether one parent inherits, or both parents inherit together
- Handicapped children who were largely supported by the deceased, or who are not likely to be able to provide for themselves: € 60,621
- Donations made by the deceased to causes, projects or organisations related to: religion, philosophy, charity, culture, science. Any causes that are considered to be for the ‘general good’ are fully exempt as well
- Some other, specific situations and or persons, may have an exemption of : € 2,129.
Please remember that these exemptions are subject to deductions, such as pensions.
Inheritance Exemption Rates
Inheritances that exceed the tax exemption amount are subject to various rates. Here is a breakdown of how the inheritance tax rates are calculated:
- The rates in inheritance law are ‘double progressive’
- This means that the higher the value of the inheritance, the higher the rate
- Double progressive rates also mean that the more distant the blood relation between the deceased and their family member, the higher the rate
- Inheritances are divided into two categories: those that go up to € 122,269 (2017) and those that exceed this amount. This chart illustrates the rates for both categories:
What is Inheritance Tax Due Over?
In the Netherlands, inheritance tax is due over:
- The deceased’s entire Dutch estate
- The deceased’s entire foreign estate
- The value of a ‘right of use’ that an inheritor might be left
- Anything the deceased bequeaths to you
- Anything the deceased leaves to you in their will
- Any payment you receive based on a life insurance, which was taken out by the deceased
- Not the deceased’s debts
- Not a surviving partner’s ‘survivor’s pension‘. However, please note that the value of this pension will be deducted from any exemption the partner may be given
- The ‘WOZ-value‘ of a property is it’s annual valuation
- The valuation procedure is carried out by the municipality
- The WOZ-value is used as a basis for determining the number of levies and taxes that should be imposed on said property
Calculating Dutch inheritance tax
In order to determine how much inheritance tax is due, the following steps must be taken:
- The economic value of the deceased’s property, in both the Netherlands and abroad, must be calculated
- The economic value of the deceased’s debts, at the time of his or her death, must be calculated
- The relationship between the deceased and the inheritors must be assessed
- Sometimes, the value of the deceased’s property has to be appraised
- When it comes to real estate, the most recent WOZ-value of the property must be taken into account
- The reports of these valuations must be submitted to the tax authorities
Inheritance tax return
Here is what you need to know about inheritance tax return in the Netherlands:
- The inheritance tax return has to be submitted within eight months of the deceased’s death
- It is the responsibility of the executor of the will to carry out the inheritance tax return
- If an executor has not been appointed, then the inheritors and legatees themselves are responsible for taking care of the tax return
- If the legatees require assistance, they can draw on the skills of a civil law notary
- In order to avoid the risk of owing interest on your inheritance tax, it is best to submit the tax return within four months
- In general, the tax authorities will send you the assessment within three months of receiving the return
Complications with Inheritance Tax
Unfortunately, in some situations, you may be at risk of double taxation if you have an inheritance from someone who lived in the Netherlands. Here’s why:
- Each country has its own rules on taxation
- In some countries, like the Netherlands, inheritance taxes are levied if the deceased’s domicile was in that country. Whether his or her habitual residence was elsewhere is of no consequence
- However, other countries levy inheritance taxes over property that is located in that country, or because the inheritor lives there
- This means that Dutch inheritance taxation laws can coincide with those of another country. If this happens, the inheritor must abide by the laws of both countries and will owe two sets of inheritance tax
- The Netherlands has only entered into a limited number of tax treaties that deal with this issue
Avoiding Double Taxation
What can you do if no Dutch tax treaty applies to your situation?
- In some cases, a ‘unilateral Dutch regulation‘ can be invoked. This will help compensate for the double taxation
- The Dutch State has reached an agreement with a number of international organizations regarding the levying of taxes, in case one of their employees passes away whilst living in the Netherlands. Sometimes, certain pieces of property are exempted from taxation. However, in other cases, an exemption applies to the entire estate. Consult your civil law notary for further information
Managing inheritance tax
Of course, your taxes absolutely have to be paid! However, there are ways to limit the amount of inheritance tax that is owed.
A solid will is necessary in order to determine how the inheritance is distributed among the inheritors in order to make optimal use of the various exemptions and rates
By ensuring that the will of the person you stand to inherit from is thorough and well thought out, you can exercise more control over the tax that you owe, and the inheritance laws that apply to you. These tips are, of course, equally applicable to your will! You can use them to ease the burden on your own loved ones. Here are the facts:
- It possible to make the law of your country of nationality applicable to your estate, instead of your last country of residence
- Whether or not this is advisable, depends on your personal circumstances, the location of your property and your relocation plans for the future. But in some cases, it will mean that you owe less tax
- It can be extremely useful to appoint an executor and/or an administrator for your will. He or she will be able to offer you advice and help you to make arrangements
- Employing a Dutch civil law notary can be of great benefit to you as well. Certain notaries specialize in international inheritance law, and will be able to offer you tailor-made advice, based on your personal circumstances
- With the help of your executor and or your notary, you can make bequests, or arrangements, that deviate from the legal inheritance rules
- Through your will, you can make optimal use of how your inheritance is distributed among all the various inheritors. There are ways in which it can be arranged, to make the most of exemptions and rates
- In your will, you can include arrangements for property that is not located within the European Union. If you do this you must take into account the laws of the country in which it is located. Doing this will help you to avoid any complications with double taxation
- If you have lived, worked and owned property internationally, it is best to include all arrangements in one single will. This will should apply to your entire estate. There can be as many clauses as necessary within this single will, that refer to specific items of property
There are further reasons why it is important to ensure that your own will, and that of the person you will be inheriting from, are constructed properly:
- It will ensure that your surviving partner is well taken care of
- It will cover the custody of any children involved
- The administration of inheritance will be clarified, meaning that the terms will be clear and harder to dispute
There are a few further ways to manage your inheritance tax as well. As we have established, the amount of tax due depends on the value of the inheritance. Hence, the lower the value of the inheritance, the lower the tax due on it. If the inheritance consists of property, here is what you can do to keep it’s value down:
- Your estate can be gifted
- You can use matrimonial property law. Under Dutch matrimonial property law, a married couple each own exactly half of their joint property and half of their debts. So, when just one of them dies, there may only be inheritance tax due over half of their estate
For further help and advice on implementing these steps, consult your civil law notary.
Matrimonial Property Law Precautions
Whilst you can use matrimonial property law to your advantage, you must still be careful! Should you pass away in the Netherlands, the national law on matrimonial property can have several unexpected fiscal consequences. For instance:
- You may have included a survivorship clause or a settlement clause in your marriage contract. The aim of such a clause is to avoid inheritance tax
- It is possible that it will not have the fiscal consequences you intended
- Dutch law contains what are referred to as ‘fictions’
- ‘Fictions’ allow certain situations, that may otherwise not have been covered by a law, to fall under its scope anyway
- This means that taxes can be levied after all
Hazards like this are another reason it is strongly advised that you seek professional advice, when handling these legal matters
- Yolanda Bokhorst is a deputy civil law notary with Van Buttingha Wichers Notarissen in The Hague. Tel: 070 – 356 68 00 Email: firstname.lastname@example.org
- De Notaristelefoon: The Notary Hotline
- Van Hilten de Vries van Ruitenbeek Advocaten & Mediators: Family and Inheritance law specialists
- Rechtshulp Advocaten: Legal Aid Lawyers