To be or not to be regarded as fiscal partner for tax purposes, that’s the question?

Who is your fiscal partner?

In the Netherlands, partners are not free to choose whether or not they wish to become fiscal partners. This is determined by Dutch tax law and depends on your personal situation. When you are married or have a registered partnership, you are automatically considered as fiscal partners for Dutch income tax purposes. Please note, when you file for a divorce or keep separate households, this could be different.

Living together but not married

If you are living together (but not married), you are only considered as fiscal partners when you are registered at the same address with the local municipality and meet at least one of the following conditions:

• You are both older than 18 years old and have a notarial cohabitation agreement
• You have a child together
• One of you has officially recognised the other one’s child
• You are eligible for each other’s pension plan
• You are co-owners of a primary residence
• You are both older than 18 years old and a minor child is registered at the same address
• You were fiscal partners in the previous year

Partners for part of the year

If you and your partner meet one of the above-mentioned conditions during the year, you will be considered as fiscal partners on the date you meet the conditions. Under specific conditions, you may opt to be considered as tax partners for the entire year.

Immigration or emigration

In the year you come to or leave the Netherlands, you are only considered to be fiscal partners when you meet the conditions and (de)register both with the local municipality on the same date. Even if your partner joins you a couple of months later, you are not regarded as fiscal partners for that tax year.

Advantages for fiscal partners

Tax obligations are personal and, in general, every taxpayer is required to file their own income tax form. However, fiscal partners have the possibility to optimise their tax positions by dividing certain income and deductions in the most beneficial way.

1. Allocate income and deductions

Common sources of income and deductions are, for example, mortgage interest, medical expenses and study costs. By allocating these costs, you can reduce your combined tax liabilities.

2. Full use of threshold amounts for Box 3 purposes

Fiscal partners can obtain a saving with respect to Box 3 (income from savings and investments), since they are entitled to a double tax-free amount. By utilising the brackets in the most beneficial way, you can reduce the tax.

3. Maximise the General Tax credit

Under certain conditions, the partner with no or limited income may be entitled to a refund of the General Tax Credit. Also, in case of allocating certain sources of income, you can make full use of unused general tax credit.

4. Benefit for partner when having the 30% ruling

When you are entitled to the so-called 30% ruling and opt for the partial non-resident tax status in the income tax form, your partner could benefit from this as well. As a partial non-resident taxpayer, your foreign savings and investments will not be taxed in the Netherlands. By allocating the Box 3 assets to the fiscal partner with the 30% ruling, savings and investments will not be taxed.

Possible disadvantage for fiscal partners: Lower personal deduction

Fiscal partners must calculate the threshold amounts for deductible items on the basis of their joint income. Combining income may result in a limitation of certain personal deductions, for example medical expenses. Contact a tax advisor in the Netherlands when you intend to move to or leave the Netherlands as early as possible. The sooner you do, the better informed you will be about the tax consequences, and the quicker you will be able to anticipate issues (if applicable).