Dutch Tax

The Dutch income tax system divides all income into three distinct categories or "boxes":

- <strong>Box 1</strong>: Income from employment, business activities, and homeownership (progressive rates)

- <strong>Box 2</strong>: Income from substantial business interests (≥5% ownership) (flat rates)

- <strong>Box 3</strong>: Income from savings and investments (wealth tax on notional returns)

<strong>Key principle</strong>: Losses from one box cannot offset gains in another box.

<strong>Box 1 (Progressive rates):</strong>

- Up to €38,441: 35.82%

- €38,441 to €76,817: 37.48%

- Above €76,817: 49.50%

<strong>Box 2 (Flat rates):</strong>

- Up to €67,804: 24.5%

- Above €67,804: 31.0%

<strong>Box 3:</strong> 36% on notional returns

A Burgerservicenummer (BSN) is a unique 8-9 digit personal identifier issued when you register in the Dutch Personal Records Database (BRP). It's required for all government interactions, including taxes, healthcare, and pensions.

The Dutch tax year follows the calendar year: January 1 to December 31. All income and assets within this period determine your tax liability.

- <strong>Box 1 restructuring</strong>: New three-bracket system with lower rates for middle incomes

- <strong>30% ruling changes</strong>: Abolition of partial non-resident status

- <strong>Self-employed</strong>: Reduced zelfstandigenaftrek (€2,470 vs €3,750 in 2024)

- <strong>False self-employment</strong>: End of enforcement moratorium

You must file if you:

- Receive an invitation letter (aangiftebrief) from Belastingdienst

- Expect to owe more than €57 in tax

- Are due a refund of €19 or more

- Have income from Dutch sources as a non-resident

- <strong>Filing window</strong>: March 1, 2025 to May 1, 2025

- <strong>Extension possible</strong>: Until September 1, 2025 (request before May 1)

- <strong>Early filing benefit</strong>: Returns filed by April 1 processed by July 1

<strong>Residents</strong>: Taxed on worldwide income across all three boxes, access to all deductions and credits

<strong>Non-residents</strong>: Taxed only on Dutch-source income, limited access to deductions/credits

Available to residents of EU countries, Liechtenstein, Norway, Iceland, or Switzerland who pay tax in Netherlands on at least 90% of worldwide income. Allows access to resident-level deductions and credits.

Payroll tax is a prepayment of income tax withheld monthly by employers. The annual tax return reconciles these prepayments with your actual tax liability, resulting in either a refund or additional payment due.

1. Apply progressive Box 1 tax rates to gross annual income

2. Calculate applicable tax credits (general + labour)

3. Subtract credits from gross tax to get final income tax

4. Subtract final income tax and other deductions from gross salary

Tax credits directly reduce your tax bill euro-for-euro (unlike deductions which reduce taxable income). Main credits are:

- General tax credit (algemene heffingskorting)

- Labour tax credit (arbeidskorting)

Maximum €3,068 for those under state pension age. Available to everyone paying Dutch income tax. Phases out: full amount up to €28,406 income, then reduces to €0 at €76,817 income.

Maximum €5,599 for work-related income. Complex calculation:

- Up to €12,169: 8.053% of labour income

- €12,169 to €26,288: €980 + 30.030% of excess

- €26,288 to €43,071: €5,220 + 2.258% of excess

- €43,071 to €129,078: €5,599 - 6.510% of excess

- Above €129,078: €0

Holiday allowance is "special remuneration" taxed at your highest marginal rate with adjustments for tax credits. This prevents under-withholding during the year and ensures correct annual tax liability.

Yes, they're treated as special remuneration and taxed at your highest marginal rate to ensure proper annual withholding. The final tax rate is settled in your annual return.

Severance payments are fully taxable Box 1 income, often taxed at the highest rate (49.5%) since they're added to your existing annual income. Payments exceeding €680,000 face an additional 75% levy on the employer.

Very limited. The system assumes employers reimburse necessary costs tax-free via the werkkostenregeling (WKR). Main exception: public transport commuting costs if employer doesn't reimburse and distance criteria are met.

Employee contributions to qualifying employer-sponsored pension schemes are fully tax-deductible. Contributions are deducted from gross salary before tax calculation, providing immediate tax relief.

Private use of company cars creates taxable income via "bijtelling" - a percentage of the car's list price added to taxable income:

- <strong>Standard rate</strong>: 22%

- <strong>Electric vehicles</strong>: 16% on first €30,000, then 22%

- <strong>Exemption</strong>: Fewer than 500 private km per year

Generally not taxable if deemed necessary for work (doesn't count toward WKR budget). If not necessary, it's taxable and must fit within the employer's WKR discretionary scope.

Occurs when individuals with multiple jobs or second earners apply tax credits at multiple employers. Since credits can only be applied once, this leads to under-withholding and unexpected year-end tax bills.

Owning at least 5% of shares, options, or profit-sharing certificates in a domestic or foreign company, either alone or with a fiscal partner.

- Dividends received from the company

- Capital gains from selling shares

- Not the value of the shareholding itself

The top rate decreased from 33% to 31%, providing relief for substantial shareholders with large dividends or capital gains.

A tax on the notional (presumed) return on your worldwide net wealth, not actual returns. Applied to assets exceeding the tax-free allowance as of January 1.

€57,684 per person (€115,368 for fiscal partners). Only net wealth above this threshold is subject to Box 3 tax.

- Bank and savings accounts

- Stocks, bonds, securities

- Cryptocurrencies

- Second homes/rental properties (not primary residence)

- Share in owners' association assets

- <strong>Savings</strong>: 1.44% (provisional)

- <strong>Investments/other assets</strong>: 5.88% (provisional)

- <strong>Tax rate on notional return</strong>: 36%

Personal debts can reduce your taxable asset base, but only amounts exceeding the debt threshold:

- <strong>Individual</strong>: Debts above €3,800

- <strong>Fiscal partners</strong>: Debts above €7,600

Because you pay tax on presumed returns rather than actual returns. Someone earning 1% on savings pays tax as if they earned 1.44%, while someone earning 12% on stocks pays tax as if they earned only 5.88%.

The system penalizes low-risk savers and benefits high-return investors, creating an incentive to shift from cash savings to investments where actual returns might exceed notional rates.

The Dutch Supreme Court ruled it can violate human rights if tax is disproportionate to actual returns. A new system based on actual returns is planned for 2028.

Your home isn't in Box 3 but creates both taxable income and a deduction in Box 1:

- <strong>Taxable</strong>: Eigenwoningforfait (notional rental value)

- <strong>Deductible</strong>: Mortgage interest payments

The official property value assessed by your municipality, used for calculating property taxes and the eigenwoningforfait. Based on the January 1 value from the previous year.

0.35% of WOZ value for homes worth up to €1,330,000 in 2025. This amount is added to your Box 1 taxable income as notional rental income.

Interest paid on mortgages for your primary residence is deductible from Box 1 income. Maximum deduction rate capped at 37.48% for 2025 (not the full 49.5% top rate).

For homeowners with both Box 1 mortgage and Box 3 debts: prioritize paying Box 3 debts first since mortgage interest provides better tax relief (up to 37.48%) than Box 3 debt reduction.

A tax advantage allowing employers to provide up to 30% of an expat's gross salary as a tax-free allowance to compensate for extraterritorial costs of working abroad.

- Employee recruited from abroad

- Specific scarce expertise (salary threshold: €46,660, or €35,468 for under-30s with Master's)

- Lived >150km from Dutch border for 16+ months in past 24 months

- Employment relationship required

Reduces taxable income: €100,000 gross becomes €70,000 taxable + €30,000 tax-free allowance, resulting in significantly lower income tax and higher net pay.

5 years (60 months), reduced by any previous Dutch residence/work periods in the last 25 years.

Yes, since 2024 it's capped at the Balkenende Norm (€246,000 salary for 2025), resulting in maximum tax-free benefit of €73,800 per year.

The 30% rate will be reduced to a flat 27% starting in 2027.

A special status (now abolished) that allowed 30% ruling holders to be treated as non-residents for Box 2 and 3, shielding worldwide assets from Dutch wealth tax.

Abolished January 1, 2025, but grandfathered until end of 2026 for those who had the 30% ruling in 2023.

Expats must now declare worldwide assets in Box 3 and pay Dutch wealth tax, potentially creating significant new tax liabilities for asset-holding expats.

Yes, if you continue meeting eligibility criteria. You and your new employer must apply within 3 months of your previous contract ending.

- Entire gross salary becomes fully taxable

- Must declare worldwide assets in Box 3

- Significant decrease in net monthly income

- Become full Dutch resident taxpayer

A special tax return required in the year you arrive in or leave the Netherlands, covering both resident and non-resident periods within the same calendar year.

The 30% allowance normally covers all extraterritorial costs, but international school fees can be reimbursed by employers tax-free as a separate benefit, provided the school follows a foreign curriculum.

Complex area governed by tax treaties. The 183-day rule often applies: if you work more than 183 days in another country, that country may tax that portion of salary, reducing the Dutch-taxable portion and 30% ruling benefit.

Taxable Profit = Annual Revenue - Deductible Business Expenses - Entrepreneurial Deductions (zelfstandigenaftrek, startersaftrek, MKB-winstvrijstelling)

€2,470 (down from €3,750 in 2024). Fixed deduction for qualifying entrepreneurs who meet the 1,225-hour criterion (urencriterium).

Requirement to spend minimum 1,225 hours annually on business activities to qualify for zelfstandigenaftrek. Includes all business time: billable work, administration, marketing, travel.

Additional €2,123 deduction for new entrepreneurs (2025). Available maximum 3 times during first 5 years of business, requires eligibility for zelfstandigenaftrek.

SME profit exemption of 12.7% of remaining profit after other deductions (2025). No hours requirement - only need to be classified as entrepreneur.

Value Added Tax charged on most goods and services. Standard rate 21%, reduced rate 9%, zero rate 0%. Must charge unless exempt or under €20,000 annual turnover (KOR scheme).

Quarterly filing with deadlines on the last day of the month following each quarter (April 30, July 31, October 31, January 31).

- Office rent and equipment

- Professional development

- Business travel (€0.23/km for private car use)

- Marketing and advertising

- Professional services (accountant, legal)

- Business insurance

- Limited home office deductions (strict rules)

- Not covered for unemployment (WW) or disability (WIA)

- Must arrange private disability insurance (AOV)

- Required to have Dutch health insurance

- Pay income-dependent healthcare contribution (5.26% of profit, capped at €75,864)

35-50% of profit as a rule of thumb, depending on income level. Covers income tax, healthcare contribution, and potential VAT liabilities.

When a working relationship resembles employment rather than genuine entrepreneurship. Enforcement moratorium ended January 1, 2025. Belastingdienst can issue corrective payroll tax assessments to clients.

- Multiple clients

- Independent marketing efforts

- Assumption of business risk

- Own equipment and workspace

- Freedom to determine working methods

- Invoicing rather than receiving salary

Actual rental income is not directly taxed. Instead, the property value is included in Box 3 as an asset, subject to wealth tax on the 5.88% notional return.

If rental activities are so extensive they constitute a business (e.g., providing breakfast, frequent cleaning for short-term rentals), net rental income would be taxed at Box 1 progressive rates.

Included in Box 3 as "other assets" with 5.88% notional return. Tax is on presumed return, not actual gains. Value on January 1 determines entire year's tax liability.

No actual losses are recognized in Box 3 since tax is based on notional returns. Losses cannot be carried forward or offset against other income.

Your actual mix of savings vs. investments on January 1 determines the weighted average notional return rate applied to your assets above the threshold.

Personal loans, student loans, credit card debt, mortgages on second homes (not primary residence mortgage). Only amounts exceeding the debt threshold are deductible.

Annual gift exemptions can help utilize children's separate Box 3 tax-free allowances. Standard exemption €6,604, higher amounts for specific purposes (home purchase, education).

As income increases beyond certain thresholds, tax credits decrease, creating effective marginal tax rates higher than the stated brackets due to "benefit withdrawal."

Apply loonheffingskorting (combined general and labour credits) only at your highest-paying job. Multiple applications lead to year-end tax bills.

A tool to adjust monthly withholding when you have multiple income sources or complex situations. Helps avoid large year-end payments by spreading liability throughout the year.

Very limited for employees. Main deductions:

- Mortgage interest (primary residence)

- Certain commuting costs

- Alimony payments

- Some medical expenses (rarely applicable)

Allows spreading irregular high income over three years to reduce tax burden. Being phased out - limited availability for certain types of income.

Prioritize paying Box 3 debts before extra mortgage payments. Mortgage interest deduction (up to 37.48%) provides better tax relief than Box 3 debt reduction.

With partial non-resident status abolished, expats need comprehensive wealth tax planning similar to Dutch nationals. Consider debt structuring and international asset allocation.

Current system is temporary pending new legislation for 2028. Plan for potential changes to actual return taxation while managing current notional return obligations.

Married couples and registered partners can elect fiscal partnership for:

- Joint Box 3 calculation with combined allowances

- Optimal allocation of income and deductions between partners

- Joint liability for taxes owed

Worldwide taxation across all three boxes requires comprehensive planning for:

- Foreign income reporting

- Double taxation treaty benefits

- Exit tax considerations when leaving Netherlands

Government policy to reduce fiscal advantages of self-employment versus traditional employment, narrowing the tax gap between ZZP'ers and employees.

Pressure to reduce tax advantages for high earners and ensure expats contribute fairly to Dutch public finances, particularly through wealth taxation.

More aggressive investigation of ZZP arrangements that resemble employment relationships. Clients face increased compliance risk and may demand stricter contractual terms.

New system based on actual returns planned for 2028. Current transitional legislation continues until then, with annual adjustments to notional return rates.

Ongoing political discussion about wealth tax levels. Current 36% rate on notional returns may be adjusted as part of broader tax reform discussions.

- All income documentation

- Business expense receipts (ZZP'ers)

- Asset valuations as of January 1

- Debt statements and interest payments

- Employment contracts and benefit statements

Minimum 7 years for most tax-related documents. Some situations (like ongoing disputes) may require longer retention.

- Significant changes in declared income/wealth

- Mathematical inconsistencies in returns

- Industry-specific risk profiles

- Random selection

- Third-party reporting discrepancies

Extensive data matching with:

- Employer reporting

- Bank account information

- Property registers

- International information exchange

- Municipal registrations

- Late filing: €83-€4,670 depending on delay

- Late payment: Interest charges from due date

- Incorrect information: Percentage-based penalties

- Fraud: Up to 100% penalty plus criminal prosecution

Generally taxed as Box 1 employment income when exercised, with value based on exercise benefit. Some arrangements may qualify for special treatment.

Professional mining activities treated as Box 1 business income. Casual mining may be treated as Box 3 asset appreciation (not directly taxed under current notional system).

Alimony payments are deductible for payer and taxable for recipient. Property transfers may have gift/inheritance tax implications.

Separate tax regime outside income tax. Annual exemptions available, with higher exemptions for specific purposes (home purchase, education).

Generally Box 1 income when received, subject to tax treaty provisions. Some foreign pension contributions may be deductible under specific conditions.

Complex area depending on:

- Tax residency determination

- Days present in Netherlands vs. other countries

- Employment contract terms

- Social security position

- Tax treaty provisions

Tax debts generally survive bankruptcy proceedings. Some relief provisions available, but tax obligations typically remain enforceable.

Consider professional help for:

- First year in Netherlands (M-form)

- Complex international situations

- Business ownership or substantial assets

- Disputes with Belastingdienst

- Ongoing tax planning needs

- <strong>Belastingdienst.nl</strong>: Primary official source

- <strong>Government.nl</strong>: General government information

- <strong>Mijn Belastingdienst</strong>: Secure online portal

- <strong>Annual tax package</strong>: Comprehensive yearly guidelines

- <strong>Tax treaty information</strong>: For international situations