Taxes for Expats in The Netherlands

    Your complete guide to expat tax in The Netherlands:

    Tax rates

    2017 income tax rates

    Taxable Income Band EUR National Income Tax Rates
    1 -19,982 8.9%
    19,982 33,791 13.15%
    33,791 67,072 40.80%
    67,072 + 52%

     

    Income in the Netherlands is categorised into boxes. The above table relates to Box 1: income.

    Income Rate Box 2 (income from a substantial interest in a limited company)

    For the year 2017 the tax rate for income from a substantial interest is 25%.

    Income Rate Box 3 (income from savings and investments)

    The tax rate for income from savings and investments stays 30%. Expats with the 30% ruling can opt to be exempted from taxation on savings and most of the investments.

    Total premium for the national insurance is 27.65% which is divided in:

    • AOW (General Old-age Pensions Act ): 17.9%
    • ANW (General Surviving Relatives Act): 0.1%
    • Wlz (Act on long-term care): 9.65%
    Who pays

    Who pays tax in the Netherlands?

    Residents are subject to income tax in the Netherlands on their worldwide income. Non-residents are subject to tax on specific Netherlands-source income only.

    How it works

    How is income taxed in the Netherlands?

    The Netherlands income tax is levied on 3 categories (boxes) of income. Each box has its own rules to calculate taxable income, its own tax rates and exemptions. In general, negative income from one box may not be offset against positive income from another box.

    Box 1 income

    Box 1 income includes employment income, business profits and income from a primary residence. Profits received from personal business operations, from independent personal services and from certain shares of partnership income are taxed as business profits. The following expat tax rules apply.

    Expatriate tax advice on employment income - Employment income includes salaries, wages, pensions, stock options, bonuses and allowances (for example, home leave and cost-of-living). Housing allowances may be taxable in certain situations. Some allowances for expenses may be paid as a tax-free allowance, subject to certain limitations and restrictions.

    Income and gains derived by private equity managers and other individuals from investments in which they are deemed to have a so-called "lucrative interest" is subject to the progressive income tax rates up to a maximum of 52% in a manner similar to entrepreneur income (the 30% facility described later under, “Special expatriate tax advice – the 30% facility” is not applicable).

    A non-resident expat receiving income from employment actually carried on in the Netherlands is subject to Dutch income tax. In certain situations the so-called 60-days rule applies. Under this rule, the Netherlands gives up its right to levy tax on employment income if the employee works in the Netherlands less than 60 days in any 12-month period. A non-resident who is employed by a Dutch public entity is also subject to Dutch income tax, even if the employment is carried on outside the Netherlands. A non-resident who is employed by a Dutch employer and is working in the Netherlands for part of the time may be liable to tax in the Netherlands on the full remuneration received from the employer. However, for the purposes of expatriate tax returns, tax treaties generally do not allow the Netherlands to tax income related to non-Dutch workdays.

    Directors' fees - Directors' fees are treated as ordinary employment income.

    An employee who is a 5% or greater shareholder is deemed to earn a salary of at least EUR44,000 a year. A lower amount may be taken into account for shareholders who can prove that their actual salaries at arm's length are less than EUR44,000.

    A non-resident receiving income as a director of a company resident in the Netherlands is subject to Dutch income tax. Tax treaties entered into by the Netherlands generally grant the right to tax this income in the resident country of the company that pays the directors' fees. Exemptions are made, among others, in the tax treaties with Switzerland and the United Kingdom.

    Income from primary residence should be considered separately with an expat tax adviser.

    Box 2 income

    Box 2 income includes profits from a substantial shareholding, which is a shareholding of at least 5% of a certain class of shares of a company resident in or outside the Netherlands. Both capital gains and regular income (dividends) are taxed. Tax is levied at a fixed rate of 25%. Non-resident expats are taxable on capital gains and regular income from a substantial interest of a company resident in the Netherlands.

    Box 3 income

    Box 3 income includes income from savings and investments. The taxpayer's net value of savings and investments, including shares and bank accounts (excluding the value of loans with respect to a primary residence), on 1 January of the calendar year, is deemed to yield income at a rate of 4%. This income is taxed at a fixed rate of 30%, resulting in a tax burden of 1.2% of the net value. Specific exemptions apply for certain assets, including art and certain life insurance policies. A general exemption of EUR21,330 applies for each resident taxpayer.

    Dutch resident taxpayers including expats are taxed on their worldwide income, including income from savings accounts maintained outside the Netherlands. European Union (EU) member states in which savings accounts are maintained must inform the EU member state where the beneficial owner of the savings account resides about the existence of this savings account. This notification is made annually. Consequently, the Dutch tax authorities are aware of savings accounts maintained outside the Netherlands, but within the EU.

    Non-residents are only taxable on the net value of real estate located in the Netherlands or on profit rights in an enterprise resident in the Netherlands.

    A dividend withholding tax is imposed on dividends paid by resident companies to resident or non-resident recipients. A 15% withholding tax is levied on dividends derived by non-resident expats, unless the rate is reduced by an applicable double tax treaty.

    DTAs

    Taxes for expats in the Netherlands: Double tax relief and tax treaties

    Most double tax treaties concluded by the Netherlands provide for double taxation relief, regardless of whether the income is subject to income tax abroad. The relief must be calculated separately for each box of income.

    The Netherlands has entered into double tax treaties with 94 jurisdictions.
    Residency

    Expat tax advice on residency

    Residence is determined based on circumstances. For Dutch residency, it is essential to determine whether the individual has permanent personal ties with the Netherlands. For this purpose, specific circumstances (social, economic and legal) are not decisive; all personal ties are relevant.

    Certain non-resident taxpayers may elect to be taxed as a resident taxpayer of the Netherlands. Furthermore, the 30% facility provides the option for residents of the Netherlands to be taxed as a “partial” non-resident expat taxpayer.

    IHT

    Do I have to pay inheritance and gift tax?

    Inheritance tax and gift tax are levied on all property inherited from or donated by an individual who was a resident or deemed to be a resident of the Netherlands at the time of death or donation. A gift made by a former Dutch resident, regardless of nationality, who left the Netherlands less than one year before making the gift is subject to Dutch gift tax. Tax is levied on an heir or a gift recipient, regardless of his or her place of residence.

    Inheritance and gift tax rates range from 10% to 40% of the value of a taxable estate or donation after deductions, depending on the applicable exemptions and the relationship of the recipient to the deceased or donor. It is worth seeking tax advice for expatriates considering their legacy or in receipt of inheritance or a gift.

    Non-residents inheriting assets from an individual who was a resident or a deemed resident of the Netherlands at the time of death are subject to inheritance taxes. To provide relief from double taxation, the Netherlands has entered into inheritance tax treaties.

    The Netherlands has concluded inheritance tax treaties with 10 countries. All treaties cover inheritance tax with respect to bequests. Only 5 of the treaties also cover gift tax. If no tax treaty applies, Dutch unilateral law for the avoidance of double taxation applies, but, in practice, it does not always prevent double taxation completely.

    Finally on this point, do not assume that just because you've expatriated to live in The Netherlands that your estate will not be liable to inheritance tax (IHT) in your old home nation, or any nation where you hold assets.  For example, those domiciled in Britain remain liable for IHT on their worldwide estate.

    If you are concerned about mitigating your IHT liability, we'd like to offer you a free initial consultation to determine whether we can help you.

    CGT

    Do I have to pay capital gains tax?

    Capital gains generally are exempt from tax. However, exceptions apply to the following assets

    • Capital gains realised on the disposal of business assets (including real estate) and on the disposal of other assets that qualify as income from independently performed activities
    • Capital gains on liquidation of a company
    • Capital gains derived from the sale of a substantial interest in a company (that is, 5% of the issued share capital)

    Non-residents are subject to income tax at normal rates on capital gains derived from the disposal of business assets and on capital gains derived from transfers of shares in a domestic corporation if the shares constitute a substantial interest.

    State pension

    Do expats get a state pension?

    The Social Security Acts can be classified into three categories, which are National Insurance Acts and Employee Insurance Acts and the Health Insurance Act. National Insurance Acts provide benefits to all Dutch residents and resident expats according to expat tax law. National Insurance contributions are payable on taxable income of up to EUR33,589 and are not deductible for tax purposes. 

    The maximum annual National Insurance contribution payable by an employee is EUR8,244 (after taking into account the social security credit). Employee Insurance Acts provide additional benefits for wage earners. Employee Insurance contributions (excluding health insurance) are EUR0 for the employee and fully paid by the employer with a maximum of EUR5,795 per employee.

    Every individual who is socially insured in the Netherlands must take out an individual health insurance policy. Resident individuals who are not socially insured in the Netherlands must register with a care insurer in the Netherlands to retain their right to medical care.

    30% expat facility

    Special expatriate tax advice – the 30% facility

    Expatriates in the Netherlands, with the right professional tax advice, may qualify for a special 30% tax facility.

    The 30% reimbursement ruling (better known as the 30% ruling) is a tax advantage for highly skilled migrants moving to the Netherlands for a specific employment role. 

    When the necessary conditions are met, the employer can grant a tax free allowance equivalent to 30% of the gross salary subject to Dutch payroll tax.

    Here's an in depth explanation of it.

    Finally...

    We believe the above information is accurate, however tax rates and rules can change, and we are NOT tax experts.  Therefore, please do not rely exclusively on the information to determine your liability for tax.

    Speak to a local tax expert for personalised advice, or consult an international taxation consultancy.

    If you'd like our help to source someone to assist you, please get in touch and we will do all we can to help.

    Relax, and join the 10,000 other international investors who have made the smart decision to let us help.

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