Paying your taxes in the Netherlands

Paying taxes in the Netherlands is a relatively straightforward affair. As the national Tax Office (Belastingdienst) says: ‘we can’t make it more fun, but we can make it easier’. Indeed, things have gotten a lot easier over the years, although taxes will never be really easy – there is still a large number of tax rules that you need to take into consideration. You can do your taxes yourself online, but if you’re not sure, use a Dutch tax advisor (belastingadviseur or boekhouder).

The 30% rule

Before moving on to the general taxation system of the Netherlands, the first relevant question for all expats in the Netherlands is: are you eligible for the 30% rule? If you are, the first 30 percent of the income you make is free from payroll and income tax for five years. The remaining 70% will be taxed in the same way as for other working people in the Netherlands.

The 30% rule is intended as a reimbursement for relocating expenses when moving to the Netherlands. Aside from the 30% tax-free income benefit, other advantages include the possibility to have a fiscal ‘non-resident status’. This means you won’t have to pay tax on assets in Boxes 2 and 3 (see below), with the exception of real estate investments. Furthermore, you can change your driving license to a Dutch license without having to take a driving test, and you can receive deductions on international school fees.

You are eligible for the 30% rule if, as a foreign worker, you are employed by a company in the Netherlands and you have specific professional expertise that is scarce or unavailable in the country (as indicated by salary requirements). Furthermore, you can’t have lived less than 150 km from the Dutch border for more 8 months during the 24 months prior to working in the Netherlands. If you meet these requirements, you and/or your employer should file an ‘Application Income tax and national insurance 30% facility’ with the Belastingdienst. You can apply within 4 months after you’ve started working and still receive all or part of the benefits retroactively. When changing employers, you need to re-apply within three months after leaving your previous job. The 30% rule will apply for no more than 5 years.

What taxes do I need to pay?

Below are the main taxes that Dutch workers and expats pay, depending on your work situation.

Inkomstenbelasting (income tax): this includes wages from your job or income from your own business or freelance income, and also applies to artists or professional athletes. Foreign income and gifts also fall into this category. Although your employer will automatically withhold this tax from your salary as loonheffing (see below), you still need to declare your income via your annual tax return. If you have your own business, then you are obliged to list all your income in your annual tax return.

Some costs can be deducted from your income, such as mortgage rent payments, premiums for annuities, school tuition costs, specific medical expenses, waived venture capital, alimony and many more.

Loonheffing (payroll tax): this is a contribution that your employer withholds from your salary. This payroll levy consists of a wage tax and various insurance contributions, such as pensions, collective unemployment insurance and a whole range of benefits and allowances. At blueumbrella.nl/ you can calculate how much your net income will be after you’ve paid all your taxes.

Omzetbelasting BTW (VAT sales tax): if you’re a freelancer or own a business, you will have to pay value added tax, which you must invoice to your clients. Depending on the type of services or goods you offer, BTW will be 0%, 9% or 21%. BTW needs to be paid every quarter.

How to pay your taxes

At the start of each year, you will receive a letter from the Belastingdienst requesting you to complete your tax return for the previous year. When filling out your return, you have to declare, aside from your income: your tax partner’s income (see below), additional income and capital like property, investments and savings, your mortgage, and tax deductions you may be eligible for. If you have any doubts or questions

about income or deductible items, you can call the Tax Office at 0800-0543. The annual income tax return needs to be submitted before 30 April, unless you apply for an extension. This can be done online or by phone. Fines will be levied if you do not submit your return or ask for an extension before the deadline, and of course if you fail to pay the taxes you owe.

In the Netherlands your income is taxed based on three ‘boxes’, with box 1 being income from salary, box 2 income from interest in a limited company and box 3 income from assets and savings. Each of these boxes has a different tax rate, based on your income sources:

Box 1: income from wages is taxed in two progressive categories, which are, for 2022: • You pay 36.93% on income up until €73.031; • You pay 49.5% on any income over €73.031.

For those receiving the national old-age pension (AOW), there are three categories, with varying percentages of tax based on your age.

Box 2: Income from a substantial interest or holding of at least 5% in a BV (limited company) is taxed at 26,9%. This includes dividends and capital gains. Any costs that were made with regard to those incomes can be deducted from taxation.

In Box 3 your (fictional) income from savings and investments is taxed, called asset tax (vermogensbelasting). Examples include stocks and shares, bank and savings accounts, houses and other property, and investment property. Some exceptions include the home you own and live in, moveable furniture, certain insurance schemes and investments in cultural, social, environmental or startup projects.

Massive changes are currently taking place in the way in which tax in Box 3 is calculated. It used to be the case that tax on assets was calculated at a fixed percentage of 4% no matter how much profit you actually made from your assets. This was considered unfair, as people with savings in the bank (usually people who are not very wealthy) made less profit, with interest being low, and so paid too much tax. People with assets in stocks or land – usually the richest – made more than 4% and so were taxed too low. From 2023, assets are divided into three categories: cash and bank balances, other assets and liabilities. Tax will be calculated based on the actual composition of the taxpayer’s assets. A separate fixed return percentage applies to each asset category. For 2023-2025 temporary measures will be in place, but the fixed return percentages have not yet been announced. It’s recommended to hire a tax adviser if you have a lot of Box 3 assets, as they will know what the most recent developments are.

In any case, for 2023, the first €57,000 in savings and investments is exempt from taxation for everybody.

Quick overview of other taxes, rules and exceptions • If you have income from another country, it is usually not taxed by the Belastingdienst. • The person you are married to or living with permanently, regardless of marital status, is usually considered your tax partner (fiscale partner). •Everyone is entitled to a general tax credit (algemene heffingskorting), depending on your income, with a maximum of €3070. Business owners are entitled to a self-employment deduction (zelfstandigenaftrek) of no more than €5030. • If you’re on a low income, you can apply for three types of benefits (toeslagen) at the Belastingdienst: healthcare allowance (zorgtoeslag), rent allowance (huurtoeslag) and childcare allowance (kinderopvangtoeslag). There is also kindgebonden budget, a tax reduction for parents that’s deducted automatically from your taxes. There are also unemployment and disability benefits, which are handled by a different office, UWV. • More specific kinds of taxes in the Netherlands include: import tax (on goods received or imported from abroad), motor vehicle tax, inheritance tax, gift tax, corporate tax, transfer tax and gambling tax.

Failure to pay any of the above, or voluntarily hiding your income, the value of your possessions or an inheritance, can lead to a fine of up to 300% of the undeclared amount.