All information correct as of June 2023
Taxes, no one likes paying them but they are unavoidable, so it’s important you educate yourself on income tax in The Netherlands. If you are in employment in The Netherlands, then you will attain resident taxpayer status and you will need to pay income tax as well as a few other Dutch taxes.
Income tax is a form of government taxation on your own income, savings, investments and financial interests in a company. As soon as you become a Dutch resident and begin earning, then you will need to file a Dutch income tax return. You can file your income tax return digitally to the Dutch Tax and Customs Administration (Belastingdienst) who uses the tax revenues to pay for roads, benefits and the judiciary.
The Dutch tax system splits different types of taxable income into three boxes with their own rates. These boxes include:
- Box 1: taxable income from employment and homeownership (wages, pensions and value of owner-occupied property)
- Box 2: taxable income from substantial interest (dividends and gains on shares)
- Box 3: taxable income from savings and investments (stocks, shares, savings accounts and second homes)
Homeownership value from box one is calculated through the WOZ value (Waardering Onroerende Zaken) which translates to the valuation of immovable property value. Municipalities use the WOZ value to determine the financial worth of homes and properties. Everyone in the Netherlands is also entitled to an amount of tax-free capital (heffingsvrij vermogen) for box three, which in 2022 was assets with a value of up to 50,650 euros as an individual and 101,300 euros as a couple.
Taxes in The Netherlands
The Belastingdienst is responsible for collecting taxes and social security contributions that largely finance government expenses. There are a number of Dutch tax categories that you may be subjected to whilst living in The Netherlands. The first of which are levied by the Dutch government like income tax and inheritance and gift tax. Other than direct taxation for individuals, the Dutch government also charges some indirect taxes such as value-added tax (BTW), tax on passengers cars and motorcycles as well as import duties.
The Dutch name for value-added tax (VAT) is Belasting Toegevoegde Waarde (BTW). Sales tax in the Netherlands applies when you sell or buy goods or services. If you have to charge or pay BTW in the Netherlands, it will be one of the following tariffs:
- The 21 % VAT rate or general tariff: applies to most products and services.
- The 9% VAT rate or low tariff: applies to a number of common products and services, such as food, medicines, books, drinks and online publications.
- The 0% VAT rate: may apply if you are based in the Netherlands and you do business in other countries, as services related to cross-border transactions are exempt from BTW.
As most of The Netherlands is below sea level and the whole country is very flat, there is a danger of serious damage to the countries infrastructure and properties as it is susceptible to floods. As a result of this, regional water boards have rates for flood protection and clean water. If you own properties, land or occupy commercial premises, then you have to pay water authority tax annually. In addition to these national taxes, every resident in the Netherlands must pay local taxes to their city council. In general, the municipality is responsible for taxes like property tax and street cleaning/waste collection charges.
Paying Taxes in The Netherlands
Although a percentage of your monthly salary is automatically deducted by the Belastingdienst, you still need to file a tax return (belastingaangifte) declaring your income and assets of the previous fiscal year, generally between March 1st to May 1st. After submitting a tax return you may receive a tax rebate, but if you miss the deadline to submit your return then you will receive a fine.
You can complete and submit your tax return online unless you only lived in the Netherlands for part of the previous year, then you may need to file a paper tax return. Before you begin to fill out your tax return, be sure to have your personal information at hand such as your income, bank accounts, and property information.
To start off, you’ll need to log in with your DigiD account then fill out the specific form that applies to your tax situation (C Form, P Form, M Form, etc). Once you have submitted the correct tax return form, you’ll receive a provisional assessment you’ll need to complete. This assessment is a temporary calculation based on the information you provided in your form, which has not yet been checked by the tax administration. You can pay your provisional assessment or receive the tax refund into your bank account. Once this information has been checked Belastingdienst by then you will receive a final assessment. If the final assessment differs from the provisional one, then you will either get a refund or have to pay the difference.
Netherlands Tax Brackets
The Netherlands is a socially conscious country, and its tax brackets represent that. Finding out your own tax rate isn't as black and white as you would think as your personal situation, type of work, residency status, and other assets and earnings will affect your position considerably. For reference though, those yet to reach the pension age whose yearly ownings are below €69,399 a year will have an income tax rate of 37.07%. Higher earners of over €69,399, however, can expect to be subject to increased taxation on their salary of 49.50%.
Your residency status in The Netherlands also affects your tax paying status. Here are the tax categories in which you can fall into:
- Resident Taxpayer: Those who live or work in The Netherlands.
- Non-Resident Taxpayer: Those who live abroad but receive income that is taxable in the Netherlands.
- Qualifying Non-Resident Taxpayer: Those who live in an EU or EEA member state, Switzerland, or one of the special municipalities of the Netherlands, and pay a minimum of 90% of their income tax in the Netherlands. Allowing them the same deductions, tax credits, and tax-free allowances that resident taxpayers receive.
Non-residents can apply to be classed as residents in order to gain access to Dutch deductible items, and residents who qualify as a highly skilled migrants may be eligible for the 30% ruling. This is a tax incentive that reduces a workers' salary by 30% for a 30% tax reduction, with the reduced salary then being made up by expenses that can be claimed back. The Belastingdienst coordinates and supervises the 30% ruling, and your application must go through them. Highly skilled migrants who are eligible for the 30% ruling may even choose to be part of the partial non-resident taxpayers’ category, so they can pay less tax in The Netherlands.
Frequently Asked Questions
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When do you have to start paying taxes in The Netherlands?
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What is the VAT rate in the Netherlands?
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How does the Dutch income tax system work?
If you are in employment in The Netherlands, then you will attain resident taxpayer status, and you will need to pay income tax as well as a few other Dutch taxes.
If you have to charge or pay BTW in the Netherlands, it will be either the general tariff with a 21% VAT rate for most products and services, or the low tariff with a 9% VAT rate for common products and services such as food and drink. There is also a 0% VAT rate if you are based in the Netherlands and you do business in other countries, as services related to cross-border transactions are exempt from VAT.
The Dutch tax system splits different types of taxable income into three boxes with their own rates. Box one consists of taxable income from employment and homeownership, box two is for taxable income from substantial interest, and box three is for taxable income from savings and investments.