Expats who are receiving income in Netherlands have to pay income tax. The Dutch taxation system divides tax based on the sources of revenue and specifies three groups. These categories are called “boxes” and are taxed at different rates (see below)
Box 1- Taxed at progressive rates up to 52%. Income from labor and owner-occupied dwelling for example:
• Business activities
• Insurance payments
• Present and past employment
• Periodical payments (e.g. alimony)
• Owner-occupied dwelling
Box 2- Taxed at a flat rate of 25%. Income received from substantial shareholdings for example:
• Capital gains
Box 3- Taxed on a 4% yield on net assets (yield is taxed at a flat rate of 30%). Income derived from savings and investments replaces general taxation on all types of income from investments, other than income from an owner-occupied dwelling. There is a flat tax rate on the total value of the savings and investments of 1.2% per year.
If you are an expat, you might need to get professional help in submitting your annual tax returns; to avoid any errors. Below are some of the most frequently asked questions by expats about the Dutch tax system.
How do I file my tax?
Filing your tax as an expat in the Netherlands is inescapable. Wage tax is submitted digitally before April 1st or May 1st of every year and is completed retrospectively for five years.
What country should I pay my taxes?
Where to pay your taxes is dependent on your residency status is because, as an expat who lives and works in Netherlands, you are regarded as a “Dutch tax resident”. You can only be exempted if your home country has signed a tax treaty with Netherlands that excludes its citizens from double taxation.
What type of taxes am I supposed to pay?
As an income earner in Netherlands, you are expected to pay wage taxes. Your employer is required by law to withhold your taxes and pay it to the Dutch tax authorities.
What is the difference between wage and income taxes?
Wage tax is a progressive tax on wages, benefits, profits, and pensions. It is an installment pre-payment towards your total income tax. Your employer withholds the wage tax each time a salary payment is made out to you.
The Dutch government tries to create an attractive environment and embraces experienced workers and talent from all over the world. To draw employees from overseas with particular skill sets, the Netherlands introduced a tax incentive called the 30% ruling. The facility was added so that qualified immigrant workers can come to the Netherlands to work. The 30% ruling allows employers to compensate their expat employees for expenses they incur while working outside their home country and is executed using a fixed cost allowance of 30% of the wage.