The taxation system in the Netherlands is based on a combination of direct and indirect taxes. The system is administered by the Dutch Tax and Customs Administration.
Double Taxation Agreements
The Netherlands has signed double taxation agreements with many countries, including the United States, the United Kingdom, and Canada. These agreements aim to avoid double taxation on income earned in both the Netherlands and the other country. They also provide relief from withholding taxes on dividends, interest, and royalties.
Main Taxes for Expats
Income Tax
Expats who are considered resident in the Netherlands for tax purposes are subject to income tax on their worldwide income. The income tax rates for resident individuals are progressive, ranging from 9.45% to 49.5%.
Non-resident individuals are only taxed on their income earned in the Netherlands. The income tax rate for non-resident individuals is a flat rate of 30%.
Value Added Tax
Value Added Tax (VAT) is a tax on the sale of goods and services in the Netherlands. The standard rate of VAT is 21%. However, there are reduced rates of VAT for certain goods and services, such as food, books, and medicines.
Special Tax Breaks for Expats
30% Ruling
Expats who are considered highly skilled migrants and meet certain conditions may be eligible for the 30% ruling. The 30% ruling provides a tax-free allowance of 30% of the expat’s salary. The allowance is intended to cover the extra costs associated with living abroad, such as housing and travel expenses.
Tax Treaty Benefits
Expats who are resident in the Netherlands but earn income from a country with which the Netherlands has a tax treaty may be eligible for certain tax treaty benefits. These benefits may include a reduction in the withholding tax rate on dividends, interest, and royalties.
Filing a Tax Return in the Netherlands
Expats who are considered resident in the Netherlands for tax purposes are required to file a tax return each year. The tax return must be filed by April 1st of the following year.
Expats can file their tax returns online using the Dutch Tax and Customs Administration’s online portal. To do so, they need to obtain a DigiD, which is a digital identification system used in the Netherlands.
When filing a tax return, expats need to provide details of their income, deductions, and credits for the relevant tax year. If they have any foreign income or assets, they may also need to declare them on their tax return.
Tax Exit Procedures
Expats who are leaving the Netherlands to move abroad need to follow certain tax exit procedures. Firstly, they need to notify the Dutch Tax and Customs Administration of their departure and provide details of their new address abroad. They should also settle any outstanding tax liabilities before leaving the Netherlands.
Expats who have paid tax in the Netherlands may be entitled to claim a refund of some of the tax they have paid. To do so, they need to file a tax return for the relevant tax year and claim the refund through the normal tax refund process.
The taxation system in the Netherlands is relatively complex, with a range of taxes and special tax breaks for expats. Expats in the Netherlands need to be aware of the main taxes that apply to them, such as income tax and value-added tax, as well as any special tax breaks that may be available. They also need to ensure they file their tax returns on time and follow the tax exit procedures if they are leaving the Netherlands to move abroad. By understanding the Dutch tax system, expats can ensure they are complying with their tax obligations and maximizing any tax benefits available to them.