Expat tax in the Netherlands: How it works
Expat tax in the Netherlands: How it works
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.
Dutch 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 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 include Dutch social security contributions.
Dutch 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 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 three months after the calendar year-end.
30% tax ruling in the Netherlands
Expats in the Netherlands who obtain the so-called 30% tax ruling, 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. When you have specific expertise as an expat, you can apply for the 30% ruling.
Requirements for the 30% ruling
Whether or not you have specific expertise is determined on the basis of the following requirements:
› your education level
› your working experience
› your salary in the Netherlands compared to the salary of a similar position in the country which you previously lived
The requirements for the 30% ruling 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.
How to apply for the 30% ruling
To apply for the 30% ruling, a request should be filed with the Dutch tax authorities. When the request is made within four 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 next month after the request was submitted.
Note that the 30% ruling applies for a period of 10 years.