8 essential tax tips for expats in the Netherlands
Broadstreet has been advising professionals, entrepreneurs and expats on reaching their personal and financial goals for over 25 years. In this article, they explain how tax works on your worldwide assets.
‘Tis the season again - for filing your income tax in the Netherlands. The Dutch Tax Agency has simplified and digitised the process even more this year, by automatically filling in the data that is available to them. For many people it will be a case of just verifying that all the numbers are correct.
It can be a different matter if you’re an expat. It’s possible that you are eligible for exemptions or rebates, and how should you file your taxes if you spent part of 2015 in another country?
Eight tax tips for expats
Here are eight essential tips to get the most out of your 2015 income tax filing.
1. New in the Netherlands? You may need an M Form
How to file your Dutch taxes as an expat depends on your personal situation during the past year. One important distinction is whether you were a resident in the Netherlands during all of 2015 or only part of it. If you did not spend the entire year here, you are required to use an M Form and cannot file your taxes online.
Filing your income taxes for the year of immigration or emigration can be complex. You must pay special attention if you earned any income during this time as it may fall inside or outside the scope of Dutch income tax.
Particularly if you move to the Netherlands on an intercompany transfer, your exact date of moving countries and payroll can affect your tax filing.
If you only spent part of 2015 in the Netherlands, it may have an influence on social security premiums ("hidden" in the first bracket of income taxes). These premium are calculated pro rata. The part exemption for social security needs to be claimed in the tax return.
2. Be aware of tax treaties
Tax treaties may give other countries the right to tax part of your income. For instance, if you spent more than 183 days in that other country, or if your employer is based in that country.
The Netherlands will grant an exemption (for employment income) or a credit (for other sources of income). You still need to file your worldwide income if you are a resident of the Netherlands, but you can claim part exemption.
3. 30% ruling and tax exemptions
If you qualify for the 30% ruling and you have (partial) non-resident status, you may be eligible for an exemption for box 3 taxes, which cover net assets such as savings and shares.
Keep in mind that property based in the Netherlands, other than your primary residence, is still taxable even if you are under the 30% ruling.
4. Mortgage interest on primary residence is deductable
Most expats know that they can deduct the interest they pay on their mortgage for their primary residence. However, many internationals aren’t aware that, in the year of and the years after emigration, mortgage interest may also be deducted.
This is applicable when the home is either for sale, or is left vacant pending an expected return to the Netherlands.
5. Benefit from residence-related deductions
If you own a heritage listed (monumental) property in the Netherlands it's possible to deduct the cost of maintenance and renovation, along with the annual land lease costs (erfpacht). Be aware that improvements are non-deductable.
6. Non-working spouses eligible for tax rebate
If your spouse is not working, and you have both been residents for the full tax year, you can claim a tax refund of up to a maximum of 2.200 euros (in 2015) through filing your returns jointly.
7. Check your childcare allowance entitlements
The Dutch childcare allowance is not strictly an income tax item, but it’s very much linked to your income tax. The allowance you’re entitled to depends both on the amount of hours your child spent in childcare and on your (joint) income.
Make sure that you file the request for the allowance on time, which is within three months after your child goes to childcare.
Be aware that a monthly allowance received in the course of the year may have to be (partly) paid back if your actual income is higher than estimated, or if you used fewer hours of childcare.
8. Make use of self-employed tax breaks
If you have your own business, during three out of the first five years, you are entitled to self-employment deductions that will considerably lower your taxable base. It is important to keep track of the number of hours you worked for your business, because a few of the deductions have a minimum requirement of 1.225 hours worked per year.
This minimum amount includes not only your billable hours, but also the hours spent on business travel, acquisition, administration and so on.
Filing your income taxes
These eight tax tips for internationals will help you avoid unnecessary mistakes while you prepare your 2015 income tax return, and now you know which exemptions and tax credits you may qualify for.
If you spent only part of 2015 in the Netherlands or you have taxable income from more than one country, it’s recommended to ask a tax advisor about your particular situation.