Expat tax in the Netherlands: how it
works

23 Nov 2009

When you live and work in the Netherlands it is
important to understand how the Dutch tax
system works. This article gives you a good and
helpful overview of the taxes in the Netherlands
that most expats encounter. It can serve as your
guide in understanding the basics of the Dutch
tax system.
 
As a resident of the Netherlands your worldwide
income will be subject to Dutch tax. Exemptions
to this rule can apply (for instance for non-Dutch
property you own), but we will not further
elaborate on this as it is outside the scope of
this article.

As an expat you will in most cases be subject to
Dutch wage tax and income tax.
 

Wage tax

The salary you receive as an expat in the
Netherlands will be subject to Dutch wage tax. It
is the obligation of your employer to withhold this
tax on your wage and to file the tax returns in
this respect. Thus, the salary you receive on
your Dutch bank account is net of wage tax. As
your employer has to withhold the wage tax and
file the tax returns, you have no obligations in
this respect. Your employer takes care of
everything.
 
The Dutch wage tax is an advance levy to the
Dutch income tax. In essence this means that
wage tax withheld by your employer reduces any
income tax that you are due. In the below
paragraph “income tax” we will further elaborate
on how this works.
 
The Dutch wage tax rate is applied at 33,5% for
the first 17.878 euros you earn. For the wage
you earn between the 17.879 euros and 54.776
euros the tax rate is 42%. For the excess salary
you receive the tax rate is 52%. The above
percentages are including Dutch social security
contributions.


Income tax

The gross salary you receive as an expat in the
Netherlands (i.e. the salary received on your
bank account plus the wage tax withheld) will
also be subject to Dutch income tax.  However,
when Dutch wage tax has been withheld, often
no or only very little income tax will be due.
Sometimes you will even be able to reclaim a
refund of the wage tax withheld.
 
No or only very little income tax is due because
the Dutch wage tax is an advance levy to the
Dutch income tax. As a result the income tax
due is reduced with any wage tax withheld. If the
wage tax withheld is more than the income tax
due, you will be able to claim a tax refund.
 
The Dutch income tax rates on your salary are
similar to the Dutch wage tax rates as mentioned
above.

Any savings and investments you have as an
expat will also be subject to Dutch income tax.
This, however, is only the case if the fair market
value of your savings and investments exceed
20.315 euros. The fair market value of your
savings and investments that exceed 20.315
euros is subject to Dutch income tax at a fixed
rate of 1,2%.
 
Your savings and investments are not subject to
Dutch income tax if you have been granted the
30% ruling.
 
Each year you need to file an income tax return
to report the amount of tax due. The filing date of
the tax return is 3 months after the calendar
year-end.
 

30% tax ruling

By obtaining a so-called 30% tax ruling you will
be able to reduce the amount of Dutch tax.
When the 30% tax ruling is granted to you, 30%
of your salary will be exempt from Dutch tax (i.e.
wage and income tax). Further, any savings and
investments you have will also be exempt from
1.2% Dutch income tax when this exemption is
applied for in the income tax return.
 
The 30% tax ruling has been introduced by the
Dutch government to attract expats with specific
expertise that is rare on the Dutch labour market
to the Netherlands. When you have specific
expertise as an expat, you can apply for the
30% ruling.
 
Whether or not you have specific expertise is
determined on the basis of the following
requirements:
(i) your education level;
(ii) your working experience;
(iii) your salary in the Netherlands compared to
the salary of a similar position in the country
which you previously lived.

The above requirements should be looked at in
connection with each other, which means that if
one requirement is not met this does not mean
that you do not have specific expertise.
 
To apply for the 30% ruling, a request should be
filed with the Dutch tax authorities. When the
request is made within 4 months after your
employment as commenced, the 30% ruling
shall have retroactive effect to the start of your
employment. When the request is made later,
the ruling shall apply from the month following
the month in which the request was submitted.
The 30% ruling applies for a period of 10 years.
 
If you need more information about expat tax in
the Netherlands, please visit Expat Tax
Experts Balthazar.


About the author
by Reinout Nelissen
rnelissen[at]netherlandstax.com