Dutch Income Tax Returns
Key points for expats in Netherlands when filing a fiscal year 2023 Dutch income tax return, amounts to enter in each box, tax credits available, fiscal partnerships and residency status for taxation purposes explained.
Personal income tax in Netherlands is regulated by the Wet Inkomstenbelasting (Income Tax Law). The Dutch tax authority (Belastingdienst) requires personal income tax returns be filed by 30th April (unless an extension has been requested). Officially, the tax bureau has up to 3 years to process the tax return and issue a final assessment.
DUTCH INCOME TAX RETURN BOXES
There are three categories of income, with each taxed at a different rate.
BOX 1: INCOME FROM EMPLOYMENT AND PROPERTY
The following categories of income apply to Box 1:
- Profit from private business
- Income from employment
- Other income from employment
- Income from former employment
- Income from periodic payments like alimony or a private pension
- Other income from capital
- Correction deduction from previous tax schemes
- Refunded premiums of a pension scheme
Notes:
- Premiums for annuity schemes and insurance premiums paid against loss of income due to disability or illness, can be deducted from the taxable income in Box 1.
- Income from employment and income (positive or negative) from the property that is used as the primary residence are taxed.
BOX 1 Tax Rate
The amount entered in Box 1 is subject to two taxes:
Income Tax – The rate applied depends on the income earned. For 2023 the rates applied are:
€0 – €37,149 = 09.28%
€37,150 – €73,031 = 36.93%
€73,032+ = 49.50%
Social Security Tax – For 2023, the Dutch social insurance tax rate is 27.65% with a maximum contribution cap of €10,216 (i.e. no social security deduction is applied against income over €37,149).
Total 2023 Tax Rate for Box 1
€0 – €37,149 = 36.93%
€35,130 – €68,507 = 36.93%
€65,508 + = 49.50%
Although there are 3 different ‘income tax’ rates (based on bracket) applied to Box 1 earnings, there are really only 2 tax rates: 36.93% and 49.50%. The taxpayer making less than €37,150 may only have to pay 9.28% ‘income tax’ but also must pay the 27.65% ‘social security tax’ (9.28% + 27.65% = 36.93%).
BOX 2: INCOME FROM SUBSTANTIAL SHARE HOLDING
This is income one receives in the capacity of substantial shareholder (ownership of more than 5% of the issued share capital of a business). Box 2 income includes dividend payments and profit from the sale of any shares.
Box 2 Tax Rate
- A fixed tax rate of 26.9% is applied to the amount in Box 2 for the 2023 tax year.
BOX 3: INCOME FROM SAVINGS AND INVESTMENTS
This is income earned from savings, investment property (not the primary residence), etc.
Box 3 Tax Rate
- A fixed rate of 32% is applied to the amount in Box 3 for the 2023 tax year.
DUTCH INCOME TAX CREDITS
In general, tax liability is a result of a tax calculation including all applicable tax credits. Please note that a tax credit consists of an income tax part and a social security part. If you are not covered by the Dutch social security system, you are not entitled to the social security portion of the tax credit. The only exemption to this rule is the labor credit.
General Tax Credit
Under conditions, every resident of the Netherlands and every employee working in the Netherlands is entitled to the personal tax credit. The 2023 personal tax credit for a full-year resident earning €73,031 or less is €3,070. For those earning €73,032 or more, the personal tax credit is €0. An employer takes the personal tax credit into account when calculating a worker’s net monthly earnings.
Employment Credit
You have a right to the employment credit if you meet one of the following conditions:
- salary or wages from current employment
- income derived from trade or business
- income from other activity
The employer will take the labor credit into account during monthly payroll calculation. In the other two scenarios, the tax office will calculate the labor credit when determining tax liability.
The 2023 Dutch income tax labor credit maximum is €884. For those earning €115,295 or more, the labor credit is €0.
In addition to the personal tax credit and employment credit, there are others which may apply based on the individual’s situation.
Examples of other tax credits:
- Combination tax credit
- Income depending combination tax credit
- Single-parent credit
- Supplementary single-parent credit
- Old-age tax credit
- Supplementary old-age tax credit
FISCAL PARTNERS
The term ‘fiscal partners’ was introduced to the Dutch income tax system in 2011. The term applies to all Dutch tax legislations.
Fiscal partners can be:
- Married
- Living together with a notarial agreement
- Registered partners
- Unmarried partners and living together with a common child
- Unmarried partners and living together with a jointly owned house
- Unmarried partners and living together with a combined pension scheme
- Unmarried partners and living together with a child belonging to one partner
The partners must be living at the same address as per the municipal database (BRP).
Fiscal partners can mutually divide some of the common income parts and deductions like the income from the primary residence and the personal deductions. Consequently, the partner with the higher income can claim a larger deduction and tax advantage.
A general tax credit can be claimed for a fiscal partner with no or little income. For 2023 the amount is €3,070 if the partner was born before 01 January 1963 and €0 if the partner was born after 01 January 1963.
DUTCH INCOME TAX RESIDENCY
A person’s living situation plays a significant part in determining their fiscal residency, as does the individual’s municipal registration data. Other factors that help define tax residency in the Netherlands include:
- The permanent home location
- The place where financial and social bonds are strongest
- The future intentions of the taxpayer
There are three possible Dutch income tax residency statuses :
- Resident
- Partial non-resident
- Non-resident
Resident
When an expat registers with a local gemeente in the Netherlands, they are automatically treated as a resident for tax purposes. A resident taxpayer is taxed in the Netherlands on his/her worldwide income.
The following Dutch income tax personal deductions can be claimed by resident taxpayers.
- Alimony payment to former spouse
- Payments for supporting children under 30 years old
- Expenses for illness (incl. cost for diet by medical orders), decease or disability
- Expenses for weekend visits to/by a seriously disabled child
- Expenses for studies for you and/or your spouse
- Expenses for maintenance of houses under protection of monuments
- Donations to charitable institutions
Resident taxpayers can also request certain allowances if they apply.
- Rent
- Health Care
- Child (not from the SVB)
- Day care
If you live and work in the Netherlands and have a child, you can claim Dutch child benefit. To qualify, the following must apply:
- You have a valid residence permit, and
- You either have a work permit or you are from an EU country or Switzerland, and
- You do not have a secondment certificate from another country
Partial Non-Resident
The qualification as partial non-resident is only applicable if the 30% ruling is granted. This status means that you will be taxed as a resident taxpayer in box 1 (income from work and principal residence) and as a non- resident taxpayer with respect to the other two tax boxes.
Non-Resident
A non-resident taxpayer is an individual who is not treated as a resident taxpayer in the Netherlands. Therefore, he will be taxed over his worldwide income elsewhere. A non-resident taxpayer will pay tax only on income that can be allocated to the Netherlands.
183 Day Ruling
In order to use the 183-day ruling within the Dutch payroll system it is first important to understand the following:
If a resident of one state works in another state, there is a possibility of double taxation. The work state will tax the individual on the income received in that state, whereas the state in which the individual is resident will tax the resident on his worldwide income, which includes the income from the work state.
Therefore, most countries have tax treaties to avoid double taxation. But the main rule is that the country in which the employment income is earned can levy tax on this income. However, the work state (in this case the Netherlands) may not levy taxes on the income if the requirements of the 183 days ruling are met.
The requirements for the 183 days ruling are:
- You do not work more than 183 days in the Netherlands during the whole year.
- The salary is paid by an employer that is not considered a resident in the Netherlands (it can not be a Dutch company).
- The salary can also not be paid by a department of an employer situated in the Netherlands.
30% Ruling
The 30% ruling allows an employer to grant an employee a tax-free allowance of 30% of his taxable income. Salary is defined as the taxable income from employment. The purpose of the 30% ruling is to compensate expatriates for all costs related to working abroad, such as double housing, house hunting costs, storage costs of furniture and a Dutch language course.
The 30% ruling can only be granted to employees who are hired from outside the Netherlands and who have special skills that are not available or very rare in the Netherlands. Please note that either the actual extraterritorial expenses can be reimbursed tax-free or the 30% ruling can be applied.
Inheritance and Gift Tax
Gifts tax and inheritance tax in the Netherlands are similar and they are regulated in the same tax law. There are three different tax rates, depending on the relationship between the giver and the beneficiary…
| BENEFICIARY | < €138,641 | > €138,641 |
|---|---|---|
| Spouse, partner (living together at least 5 years) or child | 10% | 20% |
| Grandchild | 18% | 36% |
| Other beneficiary | 30% | 40% |
The exemptions available for 2023 are…
Inheritance exemptions:
- Spouse/partner €723,526
- Child/grandchild €22,918
- Sick/disabled child €68,740
- Parents €54,270
- Other beneficiaries €2,418
Gift exemptions:
- a parent can gift to a child/children (age 18-40 years) an amount up to €6,035 tax-free (per child, per year)
- a parent can make a one-time tax-free gift to their child (age 18-40 years) up to €28,947 (unassigned) or €60,928 (study costs or house purchase, improvement or maintenance)
- a person can make a gift to another person up to €2,418 tax free (per year)
The Dutch income tax bureau (Belastingdienst) provides additional information regarding taxation in the Netherlands.
Related information…
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