Dutch tax matters explained for expats

Maguire’s expatdesk services a lot of expats annually. As a service we decided to write a short blog on Dutch tax matters for our expatclients (and all other expats in the Netherlands) which handles the basics on Dutch taxation.

30% tax ruling

The 30% tax ruling (or 30% facility) is the main tax advantage which many expats in the Netherlands can have. If the 30% tax ruling has been granted to you by the Dutch tax authorities, your employer can pay you (the expat) a maximum of 30% of his/her current employment income tax free. The payrolladministration of the employer will implement the 30% tax ruling in the Dutch payroll with retroactive effect to the startdate of your employment in the Netherlands if the ruling has been requested within four months from the startdate of your Dutch employment. If the 30% tax ruling is requested later than four months from the startdate of your employment the ruling can be implemented from the month that the request has been done. Expats will have to meet two main criteria in order to be entitled to the 30% tax ruling:

1. You have a specific field of expertise that is not or is only barely available on the Dutch employment market. You are deemed to possess that expertise if your salary (not including the tax-free allowance) in the Netherlands is at least €39.647 or €30.001 (lower salary criteria for persons under the age of 30 with a Dutch university Master’s degree or an equivalent degree in a country other than the Netherlands);
2. Of the 2 years before your 1st working day in the Netherlands, you lived outside the Netherlands for more than 16 months, at a distance of more than 150 kilometres from the Dutch border.

Residency status

Whether or not an individual is a tax resident of the Netherlands is determined by weighing all the facts and circumstances. If you live in the Netherlands (with your family) and mostly work in the Netherlands for a Dutch based employer you probably are a resident taxpayer.

Taxation

Dutch income tax is levied on three categories (“Boxes”) of income. Each Box has its own rules for the calculation of taxable income, has its own tax rates, exemptions, credits, etc. A resident taxpayer is subject to Dutch income tax for his/her world-wide income and is taxable in the Netherlands on income in all three boxes.

Box 1 consists – among other things – out of employment income and income from a primary residence (the house you live in). Dutch wage tax (together with Dutch social security premiums) is levied throughout the year (pay-as-you-earn) on employment income. The Dutch wage tax is an advance payment of the final Dutch income tax payable. If too much wage tax is withheld (common in immigration or migration years) you can get an income tax refund by filing a personal income tax return. If too little wage tax has been withheld throughout the year (this sometimes happens when you change employers during the year or receive high bonuses or salary raises) it’s possible that you have to pay income tax after filing your personal income tax return.

Box 2 consists out of of income from a substantial shareholding (at least 5% of a certain class of shares).

Box 3 consists out of income from savings and investments. One of the extra benefits of the 30% tax ruling is that a resident taxpayer can choose – via his/her Dutch personal income tax return – to be treated as a partial non-resident taxpayer for Dutch tax purposes. A partial non-resident taxpayer is subject to Dutch income tax as a resident taxpayer for Box 1 income and as a non-resident taxpayer for Box 2 and Box 3 income.

In case you are a US-citizen (or US green card holder) with the 30%-ruling, electing for the partial non-resident taxpayer status means that you are subject to Dutch income tax as a non-resident taxpayer for Box 1 income as well. A non-resident taxpayer is only subject to Dutch income tax for wages related to Dutch working days (Box 1) and for income from other specific Dutch sources (Box 1, Box 2 and Box 3) such as e.g. Dutch real estate.

Important notice for US-citizens or US green card holders with a 30% tax ruling.

A US-citizen (or US green card holder), that chooses for the partial non-resident taxpayer status, is not subject to Dutch income tax for his/her world-wide wages, but only for the wages related to his/her Dutch working days on the basis of the Dutch/US tax treaty. In this respect it is important that you keep track of the days you work/stay outside the Netherlands by means of filling in a travel calendar.

Dutch personal income tax return

The Dutch tax year extends from January 1 through December 31. You are required to file a Dutch personal income tax return each calendar year. The normal filing date for Dutch income tax returns is May 1 of the next calendar year (but one may apply for an extension). Please note that you are personally responsible yourself for filing the tax returns.

If you need help with your Dutch personal income tax return, requesting a 30% tax ruling or have any other question regarding Dutch tax matters please feel free to contact our expatdesk.