Taxation in the netherlands for expats- foreigners
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MFFA – Tax Advice
Taxation in the Netherlands for expats
As Benjamin Franklin (1706‐1790) once said: "'In this world nothing can be said to be certain, except
death and taxes”. Also in the Netherlands paying taxes is an unavoidable duty. The taxation system in the
Netherlands, especially for an expat, is not simple. The Dutch government aims to create an attractive
environment and welcomes knowledge workers and talent from abroad. Internationally, the Netherlands
is on a list of most attractive countries to do business with and to work as an employee. On the other
hand, many people (even locals) are facing administrative hurdles and bureaucracy.
If you would like to know more specifically, how taxes work in the Netherlands, especially considering
income from foreign sources, you should talk to a tax consultant. The below mentioned overview refers to
taxes in the Netherlands usually paid by individuals
Useful information can be found on the Ministry of Finance site (www.minfin.nl) where they have
published a guide (in English) about the Dutch taxation system. The Dutch tax office is called
“Belastingdienst” (www.belastingdienst.nl) and their website has some information in English.
Tax residency status
In order to know where you must pay taxes, it should be determined where your tax residency status is.
To find this out, it is important to know where you have demonstrable ties. In case this is the Netherlands
because you live here, you work here and your family is based here, you will be regarded as a “Dutch tax
resident”. As a consequence, Dutch taxation will take place on a worldwide income, unless a tax treaty for
the avoidance of double taxation leaves a taxation right (for certain items of income) to other countries.
The Netherlands have concluded over more than 100 tax treaties with other countries.
You will be seen as a “Non‐Dutch tax resident” in case you live abroad but receive income that is from
employment physically exercised in the Netherlands. In order to gain access to the deductions and levy
rebates available for resident taxpayers, you can apply to be treated as resident for tax purposes.
Wage tax in the Netherlands
In the Netherlands wage tax is the most important tax for employees. Those, who are in paid employment
are subject to wage tax. The employer that pays the wages withholds the tax and pays it to the Dutch Tax
The wage tax is an advance tax payment for the income tax. In this way, it is prevented that taxpayers
have to pay a single large payment for income tax and social security contributions once a year. The
employer withholds the wage tax at the time the employee receives his/her salary
Income tax in the Netherlands
Persons who are receiving income have to pay income tax. Individuals may receive income from different
sources. Dutch income tax takes into account the origin of the income and
distinguishes three categories. These categories are known as “boxes”. The income in each of the three
boxes is taxed at a different rate (see below)
Box 1, income from labour and owner‐occupied dwelling (taxed at progressive rates up to 52%)
includes the income from the following sources:
‐ present and past employment
‐ business activities
‐ periodical payments and pensions from individuals (e.g. alimony) or insurance institutions
‐ owner‐occupied dwelling
Box 2, income from substantial shareholdings, includes dividends and capital gains derived from
substantial shareholdings in resident and non‐resident companies. Flat rate of 25%
Box 3, income from savings and investments, replaces ordinary taxation of all types of income from
capital, other than deemed income from an owner‐occupied dwelling (Box 1) and dividends and
capital gains from substantial shareholdings (Box 2). Taxation of Box 3 is based on a 4% deemed yield
on net assets; the deemed yield is taxed at a flat rate of 30%
Filing your income tax in the Netherlands
In the Netherlands income tax returns must be filed digital before 1 April of every year. People who have
migrated to the Netherlands during the previous year will receive a so‐called M‐form and must filed it
before 1 July. To file a tax return, you will need a digital signature or DigiD (www.digid.nl) or the services
of a tax consultant.
Especially, in the year of arrival and the year of departure filing an income tax return may result in a
substantial rebate. Tax returns can be completed retrospectively for a period of five years.
30% ruling in the Netherlands
To attract employees from abroad with specific skills, the Netherlands introduced a special tax incentive
called 30% ruling facility. The reason to introduce this facility is that if an employee comes to the
Netherlands to work, they may face additional expenses (“extraterritorial expenses”). The 30% ruling
allows employers to compensate their 'extraterritorial' employees for expenses they incur in connection
with the fact that they are working outside their home country. This is done by means of a fixed cost
allowance of 30% of the wage. In order to apply for the 30% rule, the employee must be living prior to the
start of the employment 150 km from the Dutch border. Also, the employee must earn € 35,770 as a
taxable income. The salary norm for a master student up to the age of 30 is € 27.190. The salary norm
does not apply to employees (f.e. PhD) who work in the Netherlands in the area of teaching and research
at certain educational institutes, including universities, designated for this purpose. For the last two
categories of people special rules apply with respect to the 150 km requirement.
Social Security in the Netherlands
The Social Security in the Netherlands can be classified into 2 categories, which are National Insurance
Acts and Employee Insurance Acts (excluding health insurance). The National Insurance Acts provide
benefits to all residents in the Netherlands, irrespective of their nationality and whether they are working.
There are some exceptions to this general rule, e.g., for assigned employees and employees who are
(also) working abroad.
Employee Insurance Acts provide additional benefits for wage earners. Employee Insurance contributions
(excluding health insurance) are paid by the employer.
Every individual who is socially insured in the Netherlands must take out an individual health insurance
policy. Every individual aged 18 and older pays a standard contribution averaging €1,222 for health
insurance. In addition to this standard contribution, an income‐related contribution is payable at a rate of
7.75%. Employers are required to reimburse employees for this contribution and the reimbursement is
seen as income.
In case you have more questions regarding abovementioned or have more specific tax related questions,
please do not hesitate to contact us. firstname.lastname@example.org or see our website www.mffa.nl
You can also telephone us on +31 (0)6‐4375 7868