The Dutch tax system
If you live in the Netherlands, you qualify as a resident taxpayer. If you live abroad and receive income from the Netherlands that is taxable in the Netherlands, you qualify as a non-resident taxpayer. In both cases, you will be subject to Dutch income tax.
Types of income
For income tax purposes, there are three types of taxable income, classified into three so-called boxes.
- Box 1: taxable income from employment and home ownership
- Box 2: taxable income from a substantial interest
- Box 3: taxable income from savings and investments
Box 1 contains the following income:
- Wages, pension payments, social benefits, company car
- Income from other activities
- Profits from business activities
- Owner-occupied property
- Negative expenditure on income insurance
- Negative personal allowance
- Periodic benefits
The following expenditure can be deductible in Box 1:
- Employee’s allowance
- Deduction of mortgage interest and other deductible expenditure
- Expenditure on income insurance: annuities and other premiums
- Offsettable losses from employment and home ownership
Box 2 contains the following income:
- Income from shares and profit-sharing certificates that are part of a substantial interest
- Income from the disposal of these shares and profit-sharing certificates
The following expenditure can be deductible in Box 2:
- Deductible expenses
- Offsettable losses from a substantial interest
Box 3 contains the following income:
Outside these boxes additional expenditure can be deductible, the personal allowance:
- alimony paid and other expenditure on maintenance
- medical expenses and other extraordinary expenditure
- expenditure on weekend visits by handicapped children of 30 years or older
- educational expenses
- expenditure on listed buildings situated in the Netherlands
World wide income
Residents of the Netherlands should declare their entire worldwide income in their income tax return. This worldwide income also includes the revenue which the Netherlands is not allowed to tax under national and international regulations. Examples of such revenue are income from employment, profits from business activities or capital in other countries.
Non-resident taxpayers can qualify als partial resident taxpayers in the Netherlands. If this is the situation you declare your entire worldwide income and claim all the possible deductions you are entitled to. It is possible that your foreign revenue is also taxable in another country. To avoid a situation where you have to pay tax in both countries, the Netherlands grants a credit against the tax owed, which is known as double tax relief.
Partners are taxed individually where possible. This means that – in principle – you yourself pay tax on your own income, and you can only utilise your deductible expenditure yourself. However, there also exist some types of joint income and deductible expenditure. You can apportion this joint income and deductible expenditure between yourself and your partner, in accordance with your personal situation.
Each box has its own tax rates.
Also certain tax credits apply which change every year.