Dutch tax system & taxes in the Netherlands
By Abi CarterUpdated on Apr 25, 2025
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Whether you're a Dutch citizen or an expat, you are required to pay taxes if you earn money while living in the Netherlands. The Belastingdienst (Dutch tax office) collects taxes through a variety of streams. This page looks at how the Dutch tax system works, focusing particularly on income tax in the Netherlands.
Income tax in the Netherlands (inkomstenbelasting)
If you earn money or are working in the Netherlands then you need to pay tax on your income. Residents of the Netherlands are taxed on their worldwide income, while non-residents are only taxed on income from specific sources in the Netherlands.
The Netherlands operates a progressive income tax rate system in which the tax rate increases with your taxable income. Most people will pay their income tax via payroll tax (see below), where taxes are deducted from your salary by your employer. If you have multiple sources of income or are self-employed in the Netherlands, you will need to submit a tax return to calculate and pay your income tax (see below).
Income tax brackets in the Netherlands: The box system
One relatively unusual facet of the Dutch income tax system is that everyone’s income is divided into three different types of taxable income (known as “boxes”). Each type of income is taxed differently, as each box has its own tax rate. The boxes are:
- Box 1: Income from work and homeownership
- Box 2: Income from substantial interests
- Box 3: Income from savings and investments
Box 1: Income from work and homeownership
In box 1, you are taxed on your income from work and homeownership. This includes the following types of income:
- Wages from your job or employment, including gratuities such as tips
- Profits from your business or freelance profession
- Income earned as a freelancer, childminder, artist or professional athlete
- Income from pensions, benefits, annuities and maintenance payments
- Foreign income
- Home ownership of a principal residence (deemed income)
Box 1 income is taxed at a progressive rate with different tax brackets. You also benefit from a special rate if you have reached state pension age.
Box 1 tax rates for 2025
If you haven't reached the state pension age (AOW-leeftijd) in 2025, the box 1 tax rate is as follows:
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 38.441 | 35,82% |
| €38.441 - 76.817 | 37,48% |
| €76.817+ | 49,50% |
If you have reached the state pension age (AOW-leeftijd) in 2025 and were born in or after 1946, your box 1 tax rates are as follows:
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 38.441 | 17,92% |
| €38.441 - 76.817 | 37,48% |
| €76.817+ | 49,50% |
If you have reached the state pension age (AOW-leeftijd) in 2025 and were born in or before 1945:
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 40.502 | 17,92% |
| €40.502 - 76.817 | 37,48% |
| €76.817+ | 49,50% |
Box 1 tax rates for previous years
Here are the box 1 tax rates for the previous years:
Box 1 tax rates for 2024
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 75.518 | 36,97% |
| €75.518+ | 49,50% |
Box 1 tax rates for 2023
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 73.031 | 36,93% |
| €73.031+ | 49,50% |
Box 1 tax rates for 2022
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 69.399 | 37,07% |
| €69.399+ | 49,50% |
Box 1 tax rates for 2021
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 68.508 | 37,10% |
| €68.508+ | 49,50% |
Box 1 tax rates for 2020
| Annual taxable income (gross) | Total rate |
|---|---|
| €0 - 20.711 | 36,65% |
| €20.712 - 68.507 | 38,10% |
| €68.508+ | 51,75% |
Box 2: Income from substantial interests
Box 2 covers income from a substantial interest or holding (at least 5%) in a limited company or partnership such as a BV.
Box 2 income includes:
- Regular benefits such as dividends
- Capital gains, such as gains on shares
Box 2 tax rates for 2025
The rate you pay on your taxable income in box 2 in 2025 depends on your income:
| Taxable income | Percentage |
|---|---|
| up to €67.804 | 24,5% |
| €67.804+ | 31% |
In 2023, 2022 and 2021 all box 2 income was taxed at 26,90% (the two-bracket system was only introduced in 2024, when it was taxed at 24,5% and 33%, respectively). In 2020, it was taxed at 26,25%, and in 2019 and 2018 income in box 2 was taxed at 25%.
Box 3: Income from savings and investments
Box 3 is where taxes are calculated on your income from your wealth. It is calculated as the value of all your assets, minus any debts, with the government assuming a fixed return on all your investments. Everyone benefits from the same tax-free allowance on their wealth. The value of your assets, minus debts, is calculated once annually, on January 1, to determine your net capital value.
Box 3 assets include:
- Stocks and shares
- Savings held in the bank or other savings accounts
- A second home or investment property
- Endowment insurance policy (if not connected to an owner-occupied residence)
Box 3 assets do not include:
- The property you live in (if you own it)
- Moveable property such as furniture, art or a car (unless they are an investment)
- Certain kinds of insurance
- Investments in forests, nature or certain green, social, ethical, cultural or startup projects
Box 3 tax-free capital (heffingsvrij vermogen)
A fixed amount of your assets (assets minus your debts) is exempt from box 3 tax. This is called tax-free capital or heffingsvrij vermogen. Everyone is entitled to this exemption, as follows:
| Year | Tax-free capital - individual | Tax-free capital - with partner |
|---|---|---|
| 2025 | €57.684 | €115.368 |
| 2024 | €57.000 | €114.000 |
| 2023 | €57.000 | €114.000 |
| 2022 | €50.650 | €101.300 |
| 2021 | €50.000 | €100.000 |
| 2020 | €30.846 | €61.692 |
If you are above retirement age, you benefit from a higher tax-free allowance.
Box 3 tax rates
The part of your assets that is included in determining your tax is called grondslag sparen en beleggen. Because of a Supreme Court ruling on December 24, 2021, the way box 3 is calculated has changed. You can use this tool on the Belastingdienst website to calculate Box 3 taxes.
The tax rate on your income from savings and assets is as follows:
| Year | Percentage |
|---|---|
| 2025 | 36% |
| 2024 | 36% |
| 2023 | 32% |
| 2022 | 31% |
Work-related costs
As well as being taxed on your salary, another kind of income tax you might encounter is for work-related costs. The work-related costs scheme (werkkostenregeling - WKR) allows employers in the Netherlands to reimburse their employees’ expenses tax-free, up to a fixed percentage of their wages (known as the work-related costs budget). As of 2025, the limit is 2% of wages up to €400.000 per year, and 1,18% of wages above €400.000.
If the work-related costs budget is exceeded, the employer pays 80% tax on the amount reimbursed above the budget threshold.
Payroll tax (loonheffing)
Payroll tax is tax and other contributions that are withheld from an employee’s salary by the employer, which saves the employee from having to pay them later. It’s therefore considered a kind of “prepayment” on your tax bill.
The payroll tax levy is made up of tax on your salary (wage tax or loonbelasting) and national insurance contributions for pensions, unemployment allowance, long-term care, sickness benefits and other benefits and allowances.
Your payroll tax is deducted from your salary every month. It's important for expats to keep the deduction in mind when discussing salary for a new job. There is a large difference between your gross salary (bruto salaris) which includes tax, and your net salary (netto salaris), after tax is deducted.
Tax deductions
The Dutch tax system allows for a wide range of deductions to help you reduce your taxable income and therefore your tax bill. Tax deductions are possible for the following types of payments:
- Employment expenses, such as moving expenses, telephone expenses, and commuter and business travel
- Relocation costs (extra-territorial costs), such as the cost of keeping two homes, or language courses
- Mortgage interest payments (on primary residence)
- Alimony and other maintenance obligations
- Charitable donations
- Certain medical and disability expenses
- Premiums for life insurance (if pension provision is inadequate)
- Loans to start-up companies (venture capital)
General & labour tax credits
Every taxpayer in the Netherlands is entitled to receive the general tax credit (algemene heffingskorting) and every working person is entitled to receive the labour tax credit (arbeidskorting or loonheffingskorting). Both Dutch tax credits are calculated and credited to the tax balance on your salary by your employer, so it is not necessary to do anything to receive them. If you work for yourself then the tax credits are calculated when you complete your annual tax return.
You can find out more about these and other tax credits in the Netherlands on our dedicated page.
30% ruling
The 30% ruling is a tax advantage for certain expat employees in the Netherlands. The most significant benefit is that the taxable amount of your gross Dutch salary is reduced from 100% to 70%. So 30% of your wage is tax-free (from 2027, it will be 27% of your salary). Visit the 30% ruling page for more information.
Other Dutch tax benefits
There are several kinds of tax benefits (toeslagen) in the Netherlands for people on a low income. These include:
- Health care allowance (zorgtoeslag)
- Rent benefit (huurtoeslag)
- Unemployment benefits (WW uitkering)
- Child benefits
Income tax calculator for the Netherlands
It can be difficult to visualise how all of this affects your take-home income, which is where a tax calculator comes in. To calculate your net salary, you can check this income tax calculator for the Netherlands by Blue Umbrella:
Annual tax return (aangifte inkomstenbelasting)
Even though most employees have their income tax deducted automatically from their salary via wage/payroll taxes - as a kind of prepayment on your tax liability - you often still need to complete an income tax return, for instance if you move to or leave the Netherlands partway through a year, or have multiple sources of income. The Dutch tax office will inform you if you are required to do so.
Even if you aren’t obliged, you can fill out a tax return voluntarily to make use of deductions and reduce your taxable income, with the hope of getting a refund from the tax office. The tax return is sometimes necessary to balance out your "prepaid" tax with other financial aspects such as:
- Your partner’s income
- A mortgage
- Additional income, savings or investments
- Tax deductions such as costs for healthcare
Tax partners in the Netherlands
The Belastingdienst has a broad interpretation of who your tax partner (fiscaal partner) can be. Most commonly, your tax partner is the person you are married to, have a registered partnership with, or simply live with in a relationship. This third category includes the following situations:
- A person you have a formal cohabitation agreement with (samenlevingscontract).
- A person you have a child with.
- You jointly own a house which you both live in.
If the person living at your address is subletting from you, that person is not your fiscal partner. If you let someone use your address as a postal address only, that person will not be considered your fiscal partner.
Being tax partners means that you and your partner file a joint income tax return. It affects your income tax liability, as well as other taxes like gift and inheritance tax, and allows you to divide your income and deductibles in the most beneficial way for your situation.
There are some advantages to filing jointly: for instance, for box 3 taxes you get a double tax-free allowance. However, being a tax partner might mean that you are no longer entitled to certain deductibles.
Business taxes in the Netherlands
All businesses in the Netherlands are also required to pay taxes on their profits. This could include income tax, corporation tax, or just regular income tax, depending on your business form and your turnover. You can learn more about these kinds of taxes on our business taxes page.
If you are thinking of starting a business in the Netherlands, it’s a good idea to get a good accountant to make sure you remain tax compliant.
Other taxes in the Netherlands
There are many other forms of direct and indirect taxation in the Netherlands. These include:
VAT sales tax (BTW/omzetbelasting)
The Belastingdienst also collects taxes via the sales or revenue tax (omzetbelasting), known in the Netherlands as BTW (belasting over de toegevoegde waarde). All businesses, excluding some foundations and associations, must add BTW to the price of their goods and services. They must then calculate the BTW they have earned and pay this to the Belastingdienst, minus any BTW they have paid on business expenses.
Import tax (douane)
Import tax is a tax paid on goods received or imported from abroad. The amount depends on the value of the goods, and if you receive them as an individual or for your business. All imported goods are taxed with VAT as of July 2021. The previous exemption for goods with a value of 22 euros or less no longer exists.
Motor vehicle tax (motorrijtuigbelasting)
Motor vehicle tax is paid when you buy or import a motor vehicle, or when a vehicle is put under your name. The amount depends on the type of vehicle, weight and type of fuel. It falls under the environmental tax category. Find out more on our vehicle taxes page.
Inheritance tax (erfbelasting)
Inheritance tax is a tax on wealth acquired by inheritance after someone dies, if their properties and financial affairs were in the Netherlands. Dutch inheritance tax rates vary depending on the nature of the relationship between the deceased and the inheritor. Partners and children pay somewhere between 10% and 20% of the value of the inheritance above the tax-free limit, while grandchildren and great-grandchildren pay between 18% and 36%. Finally, third party relations pay between 30% and 40%.
Gift tax (schenkbelasting)
Gift tax is paid on the value of anything accepted as a gift from a resident in the Netherlands, including money, real estate and valuable possessions. People giving or receiving gifts need to file a gift tax return each year.
Like with inheritance tax, gift tax rates vary depending on the relationship between the people involved and the value of the gift, as follows:
2025 gift tax rates
| Value of gift | Partners and children | Grandchildren and great-grandchildren | Other people |
|---|---|---|---|
| €0 - €154.197 | 10% | 18% | 30% |
| €154.197+ | 20% | 36% | 40% |
However, you can also benefit from certain tax-free allowances (in 2025):
- Anyone can receive a tax-free gift up to the value of 2.690 euros.
- Parents can give their children a tax-free gift of up to 6.671 euros once per year.
- Parents can give their children (between the ages of 18 and 40) a tax-free gift of up to 32.195 euros once in their life. In the year this is used, you cannot make use of any other tax-free gift allowances.
- Parents can give their children (between the ages of 18 and 40) a tax-free gift of up to 67.064 euros if the child is doing education or training that costs at least 20.000 euros per year.
Previously, parents were allowed to give their children a bigger gift to help them buy a house and benefit from the tax-free allowance, but as of January 1, 2024, this exemption no longer exists. The only remaining option is the tax-free gift of up to 32.195 euros once in the child's life.
Transfer tax (overdrachtsbelasting)
The transfer tax must be paid by a buyer when purchasing a property or business. The most common form of transfer tax applies when someone buys a house or apartment, for which the rate is currently 2% of the property value. Learn more about the taxes, costs and fees associated with buying a house in the Netherlands.
Gambling tax (kansspelbelasting)
From January 1, 2025, a gambling tax of 34,2% must be paid on prizes worth more than 449 euros, won in any (offline) game of chance.
Double taxation agreements
The Netherlands has in place tax treaties with other countries around the world to determine which country can tax what income, in order to ensure that people who earn income in multiple countries do not pay tax on the same income twice. You can check if your country has a tax treaty with the Netherlands.
If your country has an agreement with the Netherlands, you shouldn’t be taxed twice on any of your income. You can speak to the Belastingdienst to find out more. If the Netherlands does not have a tax treaty with your country, then the Dutch authorities have the right to tax any income you receive from the Netherlands. You should speak to the Belastingdienst for advice.
Dutch tax penalties
As of July 1, 2015, the Dutch tax office has increased the penalties for undeclared income. The penalty for voluntarily declaring hidden income, wealth or inheritance has risen from 30 to 75%. Hidden income that is discovered by the Belastingdienst risks a fine of up to 300%. However, from 2018 onwards, voluntary disclosure is no longer an option for taxpayers with unreported savings and investment income.
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