How to file your annual tax return as an expat in the Netherlands

Moving to another country can be quite challenging. You have to find your way through the rules of your new country. One of the matters that needs to be taken care of are annual taxes. When you become a Dutch resident, you have to fulfil the Dutch tax requirements. Taxsight explains how it works!

In the Dutch income tax system, there are three categories of taxable income, each referred to as a "Box" and each having its own rate:

• Box 1: Taxable income from employment / self-employment work
• Box 2: Taxable income from a substantial interest (5% or more shares in a B.V. or equivalent company)
• Box 3: Taxable income from savings and investments and debts which are not considered part of Box 1 or 2

Box 1 taxation

In Box 1, you declare your personal income from employment and self-employment. Other taxable income that should be included in this box is:

• Pension income
• Income from an unemployment benefit
• Income from a disability allowance
• Alimony
• Income from other activities that do not fall under employment income or business income
• Interest income received from your own limited company (B.V.)

The Box 1 rates are as follows for 2024:

The expenses that can be claimed in your tax return

In your personal tax return, you can also claim some expenses to reduce your taxable income and thereby reduce your tax bill. Some personal expenses that can be deducted are:

• Mortgage interest and ground lease
• Donations to certain registered charity funds
• Certain medical expenses which are not covered by healthcare insurance and not part of your own risk (eigen risico)
• Travel expenses to work made with public transport (exceeding 10 kilometres) which weren’t fully covered by your employer
• Alimony paid to your ex-partner

These expenses can only be claimed against the lower tax bracket. Therefore, you receive a maximum tax refund of 36,97%.

The following items can be claimed against the higher tax rate of 49,50%:

• Premiums paid into an additional private pension. Note that there is a maximum amount that can be deducted in your personal tax return depending on your personal situation.
• Premiums paid into a private disability insurance (mainly used by self-employed people).

Box 2 taxation

When you hold shares in a legal company, for instance a B.V., this should be declared in Box 2 of the tax return. You should also report any dividends you receive as a Box 2 shareholder.

A taxpayer is regarded as having a substantial interest in a legal entity if they, either alone or together with their partner, hold at least 5% of the shares in the legal entity. This interest can be held directly or indirectly.

The value of the shares is not taxed on an annual basis in Box 2. Instead, what is taxed is the income from a substantial interest, which consists of the dividends received on such shares and any profits made from the sale of shares.

The sale of the shares is taxed if they are sold for a higher price than the purchase price or the share capital that was deposited in the company. Both are taxed in Box 2. For 2024, the tax rate is 24,9% on amounts up to €67.000 and 33% on amounts over €67.000.

It does not matter whether a person holds the shares in a Dutch or a foreign limited company. If you hold the minimum percentage of shares in a company, you are considered to have Box 2 shares.

30% ruling & Box 2

The dividend payments received as a substantial shareholder (5% or more) in a foreign entity could be exempt from Dutch taxes in Box 2 if a person has the 30% ruling application and is considered a partial non-resident taxpayer. It is required that the company which distributes the dividends is, on the basis of international tax residency rules, considered not to be located in the Netherlands.

Note that the 30% ruling application regulations changed on January 1, 2024. This has had impact on Box 2 taxation. Based on this new legislation, starting 2025, employees with the 30% ruling application should declare this Box 2 income as well.

However, employees who had the 30% ruling application in 2023 already fall under the transitional law. Starting 2027, they should declare the foreign Box 2 income regardless of whether the 30% ruling still applies.

Box 3 taxation

Dutch tax law mandates that residents with investments, savings, or property with a value of more than 57.000 euros (2024) must declare these items in Box 3 of their annual personal tax return (Box 3 debts are also included). Tax partners have a double threshold of 114.000 euros. Additionally, the net assets are valued on the reference date of January 1 of the corresponding tax year.

The Box 3 tax rate for 2024 is set at 36% and calculated on the fictional return on income. The fictional return of income in Box 3 is set as follows for 2024:

30% ruling & Box 3

If a resident has been granted the 30% ruling, they can opt to be treated as a partial non-resident taxpayer. A partial non-resident taxpayer - along with their tax partner - does not have to declare or pay tax on savings and investments in Box 3. The only exception is Dutch real estate that is not considered your primary residence. This real estate should be declared in Box 3 of your personal income tax return.

Note that the regulations on the 30% ruling application changed in 2024 regarding Box 3 as well. Starting 2025, employees with the 30% ruling application should declare their assets. However, employees who had the 30% ruling application in 2023 already fall under the transitional law. Starting 2027, they should declare their assets regardless of whether the 30% ruling still applies.

When should you file your Dutch tax return?

The Dutch tax return needs to be filed:

• If you received a letter from the Dutch tax authorities (Belastingdienst) with a filing obligation.
• If you didn’t receive a letter, but you have something to declare that leads to taxes in Box 1, 2 or 3.

You also have the option to file your tax return if you expect a refund, regardless of whether you received a letter from the tax office. The tax return can be filed up until five years later.

The tax filing deadline

The filing deadline for the personal tax return is May 1. If the tax return concerns a so-called M-form for immigration / emigration or a C-form for non-resident taxpayers, then the filing deadline is July 1. The filing deadline could also be set later by the tax office, if the letter is issued at a later stage. It is possible to apply for a filing extension of a few months if you can’t make the deadline.

Please note that if you work with a tax consultant, they can get you a longer filing extension due the filing extension ruling with the tax office.

Taxsight offers tax-filing services for individuals and entrepreneurs in the Netherlands. Whether you need help with payroll, applying for the 30% ruling, or have a specific tax situation, their tax advisors are happy to help. You can reach their team by calling +31 (20) 261 3221 or by emailing [email protected].