Demystifying Dutch income tax: Obligations and tax deductions

Many expats who work in the Netherlands may be subject to Dutch income tax. Whether or not you must pay depends on a few factors. 

First, let's define Dutch income tax:

What is the Dutch income tax return?

The Dutch income tax return (inkomstenbelasting) is a formal process through which individuals in the Netherlands declare their income, deductions, and other relevant financial information to the Dutch tax authorities (Belastingdienst).

If you are a resident or non-resident of the Netherlands and receive income from the country, you are required to meet tax obligations in relation to this income. In order to pay or receive taxes back, you have to file a tax return on an annual basis.

How much income tax do you have to pay?

There is no easy answer to that question because it depends on several factors, such as income, assets, deductible costs and outstanding debts (if applicable). How much income tax you will have to pay or you can expect to receive can be checked when completing the income tax return.

The income tax return is typically submitted annually and includes details about your various sources of income, such as employment / self-employment, investments, and other earnings. Deductible expenses, tax credits, and other relevant financial information are also reported in the income tax return.

When should you submit a Dutch tax return if you have received an invitation to do so?

If you received an invitation to file a tax return from the Dutch Tax Authorities (Belastingdienst), you need to file by the date mentioned in the invitation, otherwise, you will receive a fine or penalty. The invitation mentions that you must send the tax return before May 1 related to the year to declare.

When should you submit a tax return as an entrepreneur?

When you start a business in the Netherlands, it must be registered with the Dutch Chamber of Commerce (KVK). Subsequently, the KVK will inform the Belastingdienst of the registration. In this way, they will determine the taxes the entrepreneur will be dealing with.

Here are the tax obligations for entrepreneurs:

• Income tax
• VAT or turnover tax
• Wage tax (when the entrepreneur employs staff members)
• National insurance contributions

An invitation for a tax return will be sent in separately by Belastingdienst.

Do you need to file the income tax return if you haven't received an invitation?

If you did not receive the invitation to file a tax return, but the amount of tax payable is at least 49 euros in the income tax return (reference for the year 2022), you are obligated to file the income tax declaration. However, a tax return can be filed for up to 5 years.

Until when you can file the income tax return?

You can file the income tax return until the following dates:

• Tax year 2023: until December 31, 2028
• Tax year 2022: until December 31, 2027
• Tax year 2021: until December 31, 2026
• Tax year 2020: until December 31, 2025
• Tax year 2019: until December 31, 2024

Which tax return form applies to you?

There are different types of tax return forms:

• Tax return P: During the whole course of the tax return year, you had a resident taxpayer status or you were liable to pay social insurance contributions in the Netherlands.
• Tax return M: If you have only lived in the Netherlands for part of the tax year because you migrated to another country or just arrived in the Netherlands.
• Tax return C: If you did not live in the Netherlands during the whole year and were liable to tax and / or contributions in the country for the whole year.
• Tax return F: Tax return for a deceased business owner.

How long does it take to get the income tax return assessment?

If you file an income tax return for the year of 2023 between March and April 2024, on average you can receive a response before July 1, 2024. However, if you file the income tax return outside of those dates, the assessment may take up to 36 months.

What information is needed before filing a tax return?

They are listed below, per category:

A) Individuals

The following personal details are required for every tax return:

• Citizen service number (burgerservicenummer or BSN). If applicable, also those of your partner and children.
• Bank account details / IBAN (Preferably from a Dutch bank account)
• Telephone number
• Home address

B) Income (worldwide)

You must report your income by providing the following:

• Annual payslip (jaaropgaaf)
• Annual income statements from other countries

C) Bank account details

This includes both your Dutch and any foreign bank accounts:

• Annual statement of current accounts
• Annual statement of savings accounts, including those of any children under the age of 18.
• Annual statement from investment accounts

D) Property

Depending on your residency status, you will need to include different details on your tax return.

Non-resident taxpayer

If you are considered a non-resident taxpayer, you will need to report the following:

• The home’s WOZ value on January 1 of the previous year
• Annual mortgage statement
• The final settlement from a notary (in case of purchase or sale of your house)

Qualifying non-resident taxpayer

If you are considered a “qualifying non-resident taxpayer”, or if you have Dutch social insurance, you will also need your foreign property’s details:

E) Other

You must provide the following details only if you are a “qualifying non-resident taxpayer”. This also applies if you were living in Belgium, Suriname or Aruba, or if you were covered by Dutch social insurance.

• The value of your foreign property
• Annual mortgage statement of your foreign property
• Dividends
• Grants or loans for study costs
• Paid premiums for annuities
• An overview of paid premiums for occupational disability insurance

F) Self-employment (eenmanszaak)

Self-employed persons must provide the following:

• VAT tax declaration reports (BTW - omzetbelasting)
• Bank statement of the company (jaaroverzicht)
• Income tax return for the previous year (inkomstenbelasting)

Deductible expenses for individuals

There are different types of income. For income tax purposes, they are divided into three "boxes", each with their own tax rates:

• Box 1: Taxable income from work and property
• Box 2: Taxable income from substantial interest
• Box 3: Taxable income from savings and investments

Box 1 has the following deductible items:

• Transportation expenses (if your employer doesn't cover them and you live over 10 kilometres away from your workplace)
• Deductible costs of owner-occupied housing
• Expenses for income provisions, such as annuity premiums
• Spousal maintenance
• Specific healthcare expenses (not covered by own risk)
• Temporary stay at home for people with severe disabilities
• Study costs (up to and including tax year 2021)
• Regular donations over 60 euros or periodic donations have no limits.

30% ruling benefit

Apart from obtaining a tax-free 30% of your salary, you are considered a non-resident taxpayer for your taxable income from substantial interests (Box 2) and your taxable income from savings and investments (Box 3). This could benefit you by reducing the taxable income in Box 2 and Box 3, resulting in lower tax payments.

Hopefully, you are more informed after reading this article about filing a Dutch tax return after reading this article.