Dutch tax system & Taxes in the Netherlands

In this overview you can learn about how the tax system works in the Netherlands, in particular the annual Dutch income tax return.

Different kinds of tax in the Netherlands

Whether you're a Dutch citizen or an expat, you are required to pay taxes if you earn money while living in the Netherlands.

The Belastingdienst (Dutch tax office) collects taxes through a variety of streams. Here are the main tax types that you will most likely encounter in the Netherlands:

Income tax (inkomstenbelasting)

If you earn money or are working in the Netherlands then you need to pay tax on your income.

You declare your income tax via your annual tax return (aangifte inkomstenbelasting) which can be done online or with the help of a Dutch tax advisor.

If you are employed by a company then your income tax will be withheld from your salary by your employer, this is known as wage tax (which is contained within payroll tax).

If you are self-employed in the Netherlands then you must calculate and pay your income tax via the annual tax return.

Payroll tax (loonheffing)

Payroll tax is tax and other contributions that are withheld from an employee’s salary by the employer, which saves the employee from having to pay them later as income tax. The payroll tax levy is made up of tax on your salary (wage tax or loonbelasting) and national insurance contributions for pensions, unemployment allowance and other state benefits.

Your payroll tax is deducted from your salary every month. It's important for expats to keep the deduction in mind when discussing salary and contract terms for a new job. There is a large difference between your gross salary (brutto salaris) which includes tax, and your net salary (netto salaris), after tax is deducted. To calculate your net salary you can download the income calculator.

VAT sales tax (BTW / omzetbelasting)

The Belastingdienst also collects taxes via the sales or revenue tax (omzetbelasting), known in the Netherlands as BTW (belasting over de toegevoegde waarde). All businesses, excluding some foundations and associations, must add BTW to the price of their goods and services.

There are three different levels of BTW: 0%, 6% and 21% (the most common rate).

Businesses (including freelancers) must calculate the BTW they have earned and spent via the quarterly sales tax declaration (BTW aangifte). They then pay this amount to the Belastingdienst.

A list of other kinds of taxes can be found at the end of this page.

Annual income tax return (aangifte inkomstenbelasting)

Even though wage tax has already been withheld from your gross salary as an advance levy or payment on your income tax, you often still need to complete an annual income tax return. The Dutch tax office will inform you if you are required to do so.

The tax return is necessary to balance out your "prepaid" tax with other financial aspects such as:
your partner’s income
a mortgage
additional income, savings or investments
tax deductions such as study or healthcare costs

Do I need to do a Dutch tax return?

The Dutch fiscal year runs from January 1 to December 31. In January you will receive a letter (aangiftebrief) from the Belastingdienst asking you to complete a tax return for the previous year.

If your financial affairs are simple and do not include any of the above elements then you may not receive a letter and you may not need to submit an annual tax return.

You can always visit a Belastingdienst branch office or call the BelastingTelefoon on 0800 0543 to find out if you need to complete an income tax return and/or to request the letter.

What is the deadline for the Dutch tax return?

The time period for submitting your annual income tax return is from March 1 to April 30, unless you or your accountant request an extension (uitstel aangifte). You can do this via the BelastingTelefoon or the Belastingdienst website (you'll need your DigiD). If you do not submit your tax return or request an extension before May 1 then you can be fined.

The Box system on the tax return

Income on the Dutch tax return in the Netherlands is divided into three categories: Box 1, Box 2 or Box 3 (named after the tick boxes on the form).

Each box applies to different kinds of income and has a different tax rate. Here is an overview of the box categories and their different income sources:

Box 1: Income from salary

Income in Box 1 is taxed at different rates depending on how much you earn, with a maximum rate of 52%. Check the table below to see the rate(s) that apply to your gross salary.

Box 1 tax rates for 2015

This table lists the income tax rates / brackets (tarieven) for people below retirement age:

Annual taxable income (gross) Total rate

Tax to
pay per bracket

Cumulative tax payable
€ 0 - 19.822 36,5%* € 7.234 € 7.234
€ 19.823 - 33.589 42%* € 5.782 € 13.016
€ 33.590 - 57.585 42% €10.078 € 23.094
€ 57.586+ 52%    

* Includes 28,15% national insurance contribution

Box 1 tax rate example for 2015

Here is a sample tax breakdown for an annual gross income of 30.000 euros:
- The first 19.822 euros will be taxed at 36,5%, so tax will be 7.234 euros.
- The remaining 10.178 euros will be taxed at 42% so tax will be 4.275 euros.
- Therefore you will pay a total of 11.509 euros tax (minus general and labour tax credits)

Box 1 income includes:

- Wages from your job or employment
- Income from your business
- Income as a freelancer, artist, childminder or professional athlete
- Gratuities such as tips
- Foreign income

Box 1 deductions include:

- Deductible costs of home ownership
- Expenditure on income, such as premiums for annuities
-Alimony and other maintenance obligations
- Specific medical expenses
- Temporary stay at a home for the severely disabled
- Tuition costs and other study expenses
- Maintenance of a heritage listed building
- Waived venture capital

Box 2: Income from interest in a limited company

Box 2 covers income from a substantial interest or holding (at least 5%) in a limited company such as a BV. In 2015 and 2016 income in Box 2 is taxed at 25%.

Box 2 income includes:

- Regular benefits such as dividends
- Capital gains, such as gains on shares

dutch tax system taxes netherlands

Box 3: Assets and savings

Box 3 covers income from assets such as savings and investments. The value of your assets, minus debts, is calculated once annually, on January 1, to determine your net capital value.

Everyone is entitled to an amount of tax-free capital (heffingsvrij vermogen).

2015 tax-free capital

In 2015 you can have assets with a value of up to 21.330 euros as an individual, and 42.660 euros as a couple, without them being taxed.

2016 tax-free capital

In 2016 you can have assets with a value of up to 24.437 euros as an individual, and 48.874 euros as a couple, without them being taxed.

If you are above retirement age then these values are higher.

The Belastingdienst assumes you earn an income (voordeel) of 4% from the value of your assets. This income is taxed at 30%, which leads to an effective tax rate of 1,2% on assets.

Box 3 assets include:

- Stocks and shares
- Bank and savings accounts
- A second home or investment property
- Endowment insurance policy (if not connected to an owner-occupied residence)

Box 3 exemptions

Some assets are exempt from being taxed in Box 3, these include:
- The property you live in (if you own it)
- Moveable property such as furniture, art or a car (unless they are an investment)
- Certain kinds of insurance
- Investments in forests, nature or certain green, social, ethical, cultural or startup projects

30% ruling

The 30% reimbursement ruling is a tax advantage for certain expat employees in the Netherlands. The most significant benefit is that the taxable amount of your gross Dutch salary is reduced from 100% to 70%. So 30% of your wage is tax free.

Visit the 30% ruling page for more information.

Dutch taxes and non-residents

If you have income from another country, or you live outside the Netherlands and have a Dutch income, then you usually need to do the annual Dutch income tax return.

If you moved to or from the Netherlands during the course of the year then filing your tax return can be a wise move as you may be entitled to a substantial tax refund.

Tax partners in the Netherlands

The Belastingdienst has a broad interpretation of who your tax partner (fiscaal partner) can be. Most commonly your tax partner is the person you are married to, have a registered partnership with, or simply live with in a relationship.

General and labour tax credits

Every taxpayer in the Netherlands is entitled to receive the general tax credit (algemene heffingskorting) and every working person is entitled to receive the labour tax credit (arbeidskorting or loonheffingskorting).

Both tax credits are calculated and credited to the tax balance on your salary by your employer, so it is not necessary to do anything to receive them. If you work for yourself then the tax credits are calculated when you complete your annual tax return.

The value of your tax credit depends on how much you earn, decreasing as your income increases. In 2016 the general tax credit starts at 2.242 euros for income under 19.922 euros and drops down to zero for income over 66.417 euros. In 2016 the maximum labour tax credit is 3.031 euros.

Other Dutch tax benefits

There are several kinds of tax benefits (toeslagen) available in the Netherlands for people on a low income. These include:
Health care allowance (zorgtoeslag)
Rent benefit (huurtoeslag)
Unemployment benefits (WW uitkering)
Child allowance and childcare benefits

Other forms of taxation in the Netherlands

There are many other forms of direct and indirect taxation in the Netherlands. These include:

Import tax (douane)

A tax paid on goods received or imported from abroad. The amount depends on the value of the goods and if you receive them as an individual or for your business. If you, as an individual, receive goods worth more than 45 euros from abroad then you will need to pay minimum 2,5% import duties and BTW. The import tax also applies to internet purchases.

Motor vehicle tax (motorrijtuigbelasting)

This tax is paid when you buy or import a motor vehicle, or when a vehicle is put under your name. The amount depends on the type of vehicle (car, van, motorcycle, lorry etc.), weight and type of fuel. It falls under the environmental tax category.

Inheritance tax (erfbelasting)

A tax on wealth acquired by inheritance after someone dies, if their properties and financial affairs were in the Netherlands.

Gift tax (schenkbelasting)

A tax paid on the value of anything accepted as a gift from a resident in the Netherlands.

Corporate tax (vennootschapsbelasting)

Applies to companies that are established in the Netherlands and to those that receive income from the Netherlands but are not established here.

Transfer tax (overdrachtsbelasting)

The transfer tax must be paid by a buyer when purchasing a property or business. The most common form of transfer tax applies when a homebuyer purchases a house or apartment, for which the rate is currently 2% of the property value.

Gambling tax (kansspelbelasting)

A gambling tax of 29% must be paid on prizes worth more than 449 euros, won in any game of chance.

Dutch tax penalties

As of July 1, 2015, the Dutch tax office has increased the penalties for undeclared income. The penalty for voluntarily declaring hidden income, wealth or inheritance has risen from 30 to 60%.

Hidden income that is discovered by the Belastingdienst risks a fine of up to 300%.
 

Looking for tax advice? Check out our list of Dutch tax services & advisors in the Netherlands!

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