If you’re an expat living in the Netherlands, a cross-border commuter, or if you live outside of the Netherlands but have a business interest there, you might need to file a tax return with the Dutch authorities. Even if you’re a resident in the Netherlands for tax purposes, and your employer withholds tax from your salary under the pay as you earn system, you’ll still have to send in a tax declaration, once the year ends.
Luckily most people can file their taxes online - making the process relatively painless, if not cheap. This guide gives an overview of the Dutch tax system, who might be liable to pay taxes in the Netherlands, and what the current tax rates are.
The tax authority in the Netherlands is called the Belastingdienst. They have a helpful website with lots of information and guides, provided in English as well as German and Dutch.
Income tax in the Netherlands is paid by employees and those who are self-employed. What income you have to declare will depend on whether you’re classed as a resident or non-resident for tax purposes.
There’s also a form of corporate income tax for entrepreneurs. If you’re classed as an entrepreneur, rather than a self-employed worker, there are some extra deductions which can be offset against your tax return. However, the rules are pretty strict on this front - in most cases, you’ll only be deemed to be an entrepreneur if you have an active business which you work on most of the time, and bear some entrepreneurial risk.
For the purpose of tax in the Netherlands, income can come from many sources. It’ll include the earnings from employment, including tips, bonus payments and benefits, as well as income from investments, and interest on savings, for example.
The most up to date income tax rates for employment income, for employees and self-employed people, are as follows:
|Income range||The Netherlands income tax rate (%) 2017|
|up to €19,982||8.9%|
|€19,982 - €33,791||13.15%|
|€33,791 - €67,072||40.8%|
It’s worth noting that not all forms of income are taxed in the same way - so different rates are levied on income from investments, for example.
The Dutch tax year is the same as the calendar year - so it runs from 1 January to 31 December. It can be possible to have a different tax year for your business, however.
The deadline for submitting your tax return depends on your personal situation. Resident taxpayers usually need to get their return filed by 1 April of the year following the tax year. Non-resident taxpayers must generally submit their return by 1 July. Not sure if you’re a resident taxpayer or not? We will cover that in a moment.
If you can’t meet the deadlines for some reason, you can request a postponement from the tax authorities.
(Source, 13 December 2017)
Everyone must file a tax return - even if your taxes are withheld by your employer under the Pay as you earn (PAYE) system.
If your tax situation is simple, you can choose to submit your tax declaration either in paper form or online.
However, in some circumstances, you might have to use a paper version of the form, and submit paperwork in hard copies by snail mail. You’ll usually have to submit a paper tax declaration if any of the following applies:
- You lived in more than 2 countries over the course of the year
- You’re filing on behalf of a deceased person
- You lived in the Netherlands for only part of the relevant tax year
- You want to file a tax return as a resident taxpayer, but do not live in the Netherlands and do not have a Dutch digital ID (*DigiD*)
Many countries have residence criteria based on how long someone lives in the country during the tax year. The Netherlands, however, doesn’t view residency for tax purposes, in such a fixed light. The rules state that you’re a tax resident in the Netherlands if your main economic and personal interests are there. That means that if you have substantial ties to the Netherlands, and draw most of your income there, you might be considered tax resident even if you don’t live there all of the time.
If you’re a tax resident in the Netherlands, you’ll have to declare, and pay tax on, your worldwide income to the Dutch authorities.
If your main ties aren’t to the Netherlands you might be considered non-resident for tax purposes. In this case, you’ll declare and pay tax on only your Dutch sourced income to the Dutch authorities.
(Source, 4 January 2018)
This can get a bit complicated. If you’re classed as a tax resident elsewhere, you might be liable to pay tax on your entire worldwide income to that country. So let’s say you live in France for 8 months of one tax year, and then move to the Netherlands. You’ll likely be considered a tax resident in France and have to pay tax on your entire worldwide income, for that tax year, there. However, you’ll then be asked to declare and pay tax to the Dutch authorities for the last 4 months of the year when you were living in the Netherlands.
This is where double taxation treaties come in. These clever agreements mean that you shouldn’t need to pay tax on the same income, twice. We will discuss these more in a moment.
If you’re Dutch but move abroad, you’ll still have to file a tax return, using the M Form, in the year you leave. After that, whether or not you need to complete a tax return can vary, and you’ll need to seek personal advice from a tax accountant or from the authorities directly.
If you have Dutch sourced income, either from earnings or from other assets like savings or a rental property, then you’ll likely have to complete a tax return and pay taxes in the Netherlands on at least some of your income.
(Source, 4 January 2018)
If you’re an expat living in the Netherlands you’ll need to complete a tax return there. You’ll also probably be liable to pay tax on your income to the Dutch authorities - although this will depend on whether you’re classed as a resident or non-resident taxpayer.
That’s because tax matters are decided by domicile, rather than nationality. So you pay taxes - broadly speaking - to the country in which you’re domiciled. That means the country in which you live, or to which you have the strongest connection. You’ll be considered a tax resident of that country in most cases.
For a foreigner relocating, this can be a bit messy at first. If you leave your home country in the middle of a tax year, for example, or if you keep significant ties, and draw income from your home country. In this case you might need professional advice. You shouldn’t have to pay tax twice on the same income, though, as long as there’s a double tax treaty between your home country and the Netherlands - more on that later.
One important thing for expats to note is that they may be eligible for a tax-break thanks to what’s called the 30% ruling. To attract expats to work in certain ‘in demand’ jobs in the Netherlands, the government have ruled that under certain circumstances, some incoming foreigners can take up to 30% of their annual salary tax-free, for a period of up to 8 years. If you qualify under this 30% ruling you can opt to be only ‘partially resident’ in tax terms, which can further reduce your tax burden. However, this scheme has been criticised and is politically unpopular with some - this means the rules may change.
If you’re a student and work in the Netherlands, you’ll still have to complete a tax return, and pay income tax according to the schedules set out above. It’s important to note that income such as study grants is also taken into consideration when calculating taxes - however, as a student, you may be eligible for some deductions and allowances to offset this. For example, some of the costs of study could be claimed as an exemption if you’re on a qualifying course.
(Source 13 December 2017)
Under Dutch tax laws, you’ll have to identify whether you’ll be taxed as self-employed, or as an entrepreneur. In both cases, you must complete a tax return and pay taxes according to the schedule set out above. If you’re classed as an entrepreneur the rules about what you can claim as an expense are slightly different and there are more allowances available to take into account the risk you bear as a business owner.
(Source, 4 January 2018)
Double taxation agreements can be a real help if you’re liable to pay tax in more than one country. Under these agreements, tax paid in one country can be offset against the tax demanded in another, so you shouldn’t have to pay twice on the same income.
The Netherlands has double taxation agreements with the following countries:
|The Netherlands double taxation agreements|
|Aruba, St. Maarten||Mexico|
(Source 6 December 2017)
If you’re employed, your employer will withhold tax from your salary, under the PAYE system. This is done according to an estimate of what you’ll need to pay, based on your earnings from the previous year. After the tax year finishes you’ll receive a letter asking you to submit your tax return, which you can do on paper or online. This process is designed to confirm that the right amount of tax was withheld during the year. The tax authorities will check your actual earnings against the estimate used, and decide if you need to pay any more - or if you can get some of your money back.
If you’re a freelancer in some circumstances you can opt into the PAYE system, and have your employer withhold tax, without becoming a contracted employee. Self-employed people in general, though, have to self-assess for tax purposes.
To pay your taxes online, you need to have a digital ID, called: DigiD. You get to choose your own username and password, so make sure to choose a secure combination. DigiD is not only used by the Dutch Belastingdienst, but also by many other government agencies and the healthcare sector. If you’re sending in paper forms, you can download the correct paperwork from the tax authorities website and send it back. You’re advised not to send in documents unless they’re requested from you.
If your taxes weren’t withheld under the PAYE system, or if you find you have to pay more, you might need to make a bank transfer for the outstanding amount. If you’re an expatriate paying taxes in the Netherlands from a bank account held in a different country or currency you’ll need to watch out for any charges that will be added to the transfer you make to pay your taxes.
You also need to check the exchange rate applied when converting your cash from a different currency. Your taxes could cost you more than they have to because banks and money exchange services often don’t use the real, mid-market rate, which you’d find on Google. Instead, they mark up the rate by an average of 4-5% to make a profit on the transaction. The end result is that you end up out of pocket.
If you need to make an international money transfer, a great alternative is to use TransferWise. TransferWise works differently to banks, so transfers are made using the real exchange rate, and just a small, upfront fee. This is possible because TransferWise doesn’t use the pricey SWIFT bank transfer system. This brings down the costs, and the savings are passed on to the customer.
If the Dutch authorities will accept a third party transfer, you might be able to pay your taxes directly using a TransferWise transfer. If it’s not possible to pay directly, and you don’t already have a bank account in the Netherlands, you could transfer the payment to a friend or family member who does, to bring down the costs.
If you often have to move your money between different currencies, you might also want to check out the new TransferWise borderless multi-currency account. This is a great tool for expats and frequent travellers because you can hold your money in any one of dozens of different currencies and then switch between them whenever you need to. This can save you time - but also money - because the real exchange rate is used for every currency conversion you make.
Tax is seldom simple, and it can be hard to work out your options and duties. However, it’s important you understand how the rules apply in your case, as getting it wrong can be an expensive mistake.
Whatever your tax bill looks like, you could end up paying more than you realise because of unfair fees levied on converting your currency. However, TransferWise might be able to help you save money on cross-border transactions. See if you can get a better deal from TransferWise if you find yourself needing to pay your taxes abroad.
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