Dutch tax on your worldwide net assets

As a resident of the Netherlands, you are most likely aware of having to pay tax on your income. For those of you who are in employment, the tax is taken out of your monthly pay by your employer and transferred to the tax authorities.

In addition to the tax on your salary, you may also be subject to tax on your assets. You have to report this tax yourself, there is no automatic deduction. 

Income tax system

The Dutch tax system consists of the following boxes:
› Box 1: income from work and dwellings
› Box 2: income from substantial shareholdings
› Box 3: income from savings and investments

Many expats are aware of having to pay tax on savings and investments, but not everybody is clear on what needs to be reported and how the taxation takes place.

What you need to report

As a resident, you are subject to taxation on your worldwide savings and investments, regardless of where the assets are situated. The assets that must be reported are:
› Savings
› Investments accounts
› Cash savings
› Real estate
› Assets transferred into trust funds (subject to specific regulations)

For some assets, exemptions are applicable. For instance, real estate situated outside of the Netherlands will have to be reported in your Dutch tax return, but a double taxation relief will be applicable due to the fact that most tax treaties allocate the right to levy tax on real estate to the country where the real estate is situated.

Unlike many other countries, Dutch tax is levied on the assumption that you can have a certain return on your investment, not on the actual return. The actual return, such as interest, dividends, rent or capital gains, remains untaxed.

Tax free savings

Every tax resident is entitled to 25.000 euros of tax free savings. For 2017, the assumed return on your savings and investments is:

The assumed return is taxed against 30% income tax. The reference date to determine your savings and investments is January 1 of each year. 

Example 1:

You have an investment portfolio of 50.000 euros and a savings account of 20.000 euros.

Your total savings and investments come to 70.000 euros, of which 25.000 euros is tax free. For the remaining amount of 45.000 euros, an assumed return of 1.291 euros is taken into account. 

This assumed return is taxed with 30 percent income tax. The tax bill on your savings will amount to 387 euros. 

Example 2:

You have a savings account of 850.000 euros and an investment portfolio of 300.000 euros.

Your total savings and investments add up to 1.150.000, of which 25.000 euros is tax free. For the remaining 1.125.000 euros, the following return is assumed.
› 75.000 euros -> 2,87% = 2.613 euros
› 900.000 euros -> 4,6% = 41.400 euros
› 150.000  euros -> 5,39% = 8.085 euros

The total assumed return adds up to 52.098 euros regardless of the actual accomplished return. The tax bill on the total asset comes down to 30 percent on the assumed yield, which is 15.630 euros.

It is your own responsibility to report all your savings and investments, even if they are held in accounts abroad.

Not having reported your savings and investments

If the tax office discovers you have savings and investments abroad which you have not reported, they have the legal right to correct your tax returns and tax you on your unreported savings and investments. They are even allowed to correct your tax returns up to 12 years back for assets held outside the Netherlands!

Besides correcting your tax return, you will face interest and substantial penalties for not having reported your assets correctly. The penalties can go up to as high as 300 percent of the tax you should have paid. 

If you think you should have reported savings and investments, or if you are unsure if you have assets that should have been reported, it is important to contact a tax advisor to assist you further in this matter.

Looking for guidance on how to file your taxes in the Netherlands? Contact Patricia van der Hut, a partner at Broadstreet, providing specialist tax and accountancy services to expats.