How is a second home in the Netherlands taxed? It is owned by a non-resident.
In the Netherlands not the real income from the property is taxed and the related costs are not deductible. Instead the tax is calculated based on the average value of the property minus the outstanding mortgage. Over this amount a deemed income is calculated of 4% taxed at a fixed rate of 30%.
Value property: EUR 200,000
Mortgage: EUR 150,000
Tax: 200,000 -/- 150,000 = 50,000 * 4% fictitious profit * 30% tax = EUR 600 to be paid
If you are living in the EU a tax free amount is applicable (EUR 24,437 in 2016). This would lead to the following calculation:
Tax: 200,000 -/- 150,000 -/- 24,437 = 25,563 * 4% fictitious profit * 30% tax = EUR 306 to be paid
So you can see that the mortgage will reduce taxation. If the mortgage is higher than the value of the property no tax has to be paid. The same answer is applicable if you are living in another country than the UK with which the Netherlands has signed a tax treaty, for example with all the EU countries and dozens of other countries.