Dutch Tax Tips: Taxation of domestic & foreign income
Tax status in the Netherlands
The Dutch tax system has two types of tax residency, which determines how your income will be taxed in the Netherlands:
› Resident taxpayer
Resident taxpayers are taxed on their world-wide income, savings and investments.
› Non-resident taxpayer
Non-resident taxpayers are taxed only on their Dutch income, saving and investments.
Taxable sources of income
The Dutch tax system defines three taxable sources of income, called Boxes:
› Box 1
Income from (self-) employment & main residence
› Box 2
Income from a substantial interest (more than 5% of the shares / profit rights of an LLC)
› Box 3
Income from saving & investments
A resident taxpayer is taxed on world-wide income in all three boxes. If a resident taxpayer has an income source in a country which has a tax treaty with the Netherlands, the right to taxation may be allocated to the other country, and an avoidance of double taxation may be applicable.
Many expats are unaware they have to declare the savings and investments (Box 3) which they hold abroad in their Dutch income tax return.
As a non-resident taxpayer you are taxed on Dutch-sourced income in all three boxes. Dutch-sourced income for the boxes is as follows:
› Box 1: Income from Dutch employment or Dutch self-employment income
› Box 2: Income from a Dutch substantial interest
› Box 2: Income from Dutch savings as well as investments. In practice this usually means you only need to declare real-estate in the Netherlands.
With partial non-resident tax status you declare your income in Box 1 as a resident taxpayer, and for Box 2 and Box 3 as a non-resident taxpayer.
The benefit of this is that you only have to declare Dutch real estate in Box 3. You do not have to declare any savings and / or investments you hold in other countries in your income tax return.
If you have income from abroad, we advise you to consult a trustworthy tax advisor to save time and money, and avoid double taxation.