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Taxes, Benefits and Social Security

Dutch Income Tax System

For an expat, the tax system is especially complicated. The Netherlands can take more than 50% of your salary for taxes. Your personal situation (type of work, partner’s work status, residency status and other assets and earnings – particularly from abroad) will affect your tax status. You may be filing a tax return in your home country and so will have to deal with double taxation agreements.

There are many expat financial specialists who can complete your tax forms for you or provide other consultant services.  In addition, the tax service is the Belastingdienst and their website has information in English.

Generalization of the Way the Tax System Works

If you work in an employment situation, payroll tax is withheld from your salary. As an example, the calculation for your income tax calculation may look like this:

Salary: €100,000
Income tax due on salary: €42,000
Less payroll tax on salary: €42,000
Balance: 0

So, for the full fiscal year, if you have worked in an employment situation, you may not have to pay any additional income tax. In fact, you might not even have received an invitation to file your return. If you haven’t, you have the option to request that the tax authorities issue a tax form anyway. This would be the case, for instance, if you know you have income that hasn’t yet been taxed, but you are still obliged to report it to the tax authorities. So, you must request a form to submit your tax return.

Calculate your Dutch income tax using the Blue Umbrella tax calculator here.

However, even if you do not have anything to declare other than your regular employment income, it may still be worthwhile to submit a return. If you have had tax-deductible expenses, you may want to submit your return to reclaim taxes. If you and your partner both work and have a child under the age of 6, you may be entitled to the income-dependent combination tax credit. As a single parent, these tax credits may be more.

It is a good idea to do research and seek advice on what deductibles or credits may be applicable in your situation.

When to File

The Dutch fiscal year runs from January 1st to December 31st. Beginning in February, the tax authorities mail notices to submit your income tax return, which generally has to be submitted before April 1st. If you receive the tax form much later than February, a different submission date will be applicable. This date will be mentioned on the form.

Retrospective Taxes

If you have just discovered that you may have been entitled to a rebate for previous years, but you never filed a tax return, you can still file your tax returns retrospective for five years. So it is still possible to file your 2012 tax returns up until December 31st, 2017. In short, it may be worth your while to file an income tax return, even if you have not received an invitation yet.

Extensions

If you need an extension for filing, you can apply online. The tax authorities will impose a penalty for late filing, so it is important to keep a close eye on the deadline.

What You Need

The tax authorities issue different types of tax forms:

  • P form: The most common tax form for those who are in a regular employment situation and have resided in the Netherlands the entire year.
  • M form: For those who arrived in the Netherlands during the year and became a resident or for those who were resident and left the Netherlands during the year, this form may be most beneficial because of the way the Dutch wage and income tax are calculated.
    • The tax for wage and income is calculated through four progressive tax brackets. The higher your income, the higher your tax bracket. There is a wage tax that is withheld from your salary. This is levied on the basis of your estimated annual salary, which is then calculated back to a monthly amount. So, if you have only worked for half a year in the Netherlands, your gross annual salary will be lower than estimated, and the wage tax withheld will be too high. An income tax return will result in a rebate of this wage tax.
    • Also, the national insurance contributions take up the biggest part of the first and second tax brackets. If you have only lived and worked in the Netherlands for part of the year, you may be exempt from national insurance contributions for the full year or part of the year.
  • C form: For non-residents who have had Dutch sourced income during the year.
  • W form: For those who have had income from self-employment.
  • F form: For relatives of a deceased person.

In general, tax returns are submitted digitally, except the M form which must still be filed on paper in the year of migration. The deadline for the tax return is generally April 1st, but for the M form, it is July 1st. If you are not able to file before April 1st, you can request an extension. You will need to go to the website of the Belastingdienst in order to download the program to enable you to file your return digitally.

To file a return, you will need a digital signature or DigiD (www.digid.nl). If you don’t have either of these, you will need the services of a tax consultant. The DigiD is essentially a personal login that you use with all government agencies. A DigiD allows you to make a few transactions, such as paying parking fines or applying for permits, over the internet. Security authentications differ according to the sensitivity of information in transit.

In the year of arrival and in the year of departure, filing a tax return may result in a substantial rebate.

Residency Tax Status

If you live or work in the Netherlands, or if your family is based here, you are considered to be a ‘resident taxpayer’ from the first day you are here. If you live abroad but receive income that is taxable in the Netherlands, you are generally a ‘non-resident taxpayer’. Non-residents can also apply to be treated as residents for tax purposes (in order to gain access to Dutch deductible items). A category of partial non-resident taxpayers covers those eligible for the so-called 30% ruling. As a resident taxpayer, you are taxed on your assets worldwide.

Taxable Income

Different categories of income are treated differently for tax purposes on the tax return, and there are three types of taxable income:

Box 1: Income from profits, employment and home ownership.

  • maximum 52 percent
  • Box 1 includes:
    • wages
    • pensions
    • social benefits
    • company car
    • WOZ value of owner-occupied property
    • maximum 52 percent

Box 2: Income from substantial shareholding

  • 5 percent minimum holding
  • 25 percent rate

Box 3: Taxable income from savings and investments

  • not the actual income but a percentage of the value of the asset

Calculating tax: the amount of tax payable is calculated by applying the various tax rates to the various taxable incomes in the boxes. The amount calculated is then reduced by one or more tax credits.

Tax Credits and Allowances

Everyone is entitled to a general tax credit and may be additionally entitled to other credits such as the employed person’s tax credit (age- and income-related) and the single parent’s tax credit. The general tax credit comprises an income and social security element (to which you are only entitled if you have compulsory Dutch social security coverage). Your employer will take these into account when deducting wage tax but not any other personal circumstances.

You claim other allowances and potential refunds when you file your tax return or request a provisional refund.

Partners

Where possible, partners are taxed individually, but if only one partner works, the other partner is generally entitled to a refund of general tax credit, and deductibles can be apportioned to take advantage of tax credits. Unmarried couples may qualify as tax partners under certain circumstances, such as if they have a child or own a home together. Details are listed on the website of the Belastingdienst.

Mortgages and Tax Implications

When arranging a mortgage, it is important to look at the whole picture: interest, cost of life insurance, savings plan and investment accounts. If you are intending to sublet your house, you may need to pay off a substantial part of the mortgage to get permission from the lender. When your interest rate comes up for renewal, it is important to check that it is still competitive.

Tax implications include:

  • Interest payments are tax-deductible if the property is your primary residence and the loan is used for acquisition of the house.
  • There is no capital gains tax in the Netherlands, but increases in the value may impact your mortgage relief if and when you use the profits to buy another house in the Netherlands.
  • Tax is levied on the deemed rental value of the house (WOZ) determined by the local authority. Expenses in financing the purchase of a house are tax-deductible.

After submission

Once you have submitted your tax return, you will receive a preliminary assessment from the tax authorities. If you were invited by the tax authorities to submit your return before April 1st, and you have done so, you will receive notice from the tax authorities before July 1st.  In any other case, it may take around 10 to 12 weeks before the tax authorities send you a notice. Additionally, if you submitted either a C or an M-form with your tax form, it may even take up to 6 months or longer. Initially, a preliminary assessment will be sent to you from the tax authorities. This assessment is based on the tax return, but the tax authorities have not yet checked your tax return. Once they have checked the return, they will send you a final assessment.