A few things in life are certain and taxes are one of them. Income taxes in the Netherlands can be quite complex - that’s why the team from Taxt is here to explain the essentials as simply as possible.
Dutch income taxes
The Dutch tax year is equal to a calendar year. Individuals are obligated to submit an income tax return annually if they have received a tax filing notification letter (the blue envelope) from the Belastingdienst (Dutch Tax and Customs Administration).
Individuals that are due to pay income tax but did not receive such tax filing notification letter, are still obligated to submit an income tax return. Common examples of individuals that have to pay income tax without receiving such notification from the Belastingdienst, are (part-time) freelancers (zzp’ers) or individuals with investment real-estate in the Netherlands.
The Dutch regular “tax season” runs from January 1 to April 30 of the year following the relevant tax year. Income tax returns for individuals who migrated from or to the Netherlands (M-Forms) during the tax year, can be submitted until July 1 of the following year.
Filing a request for extension
A request for extension until September 1 can be done by individual taxpayers. You can easily do this by calling the Belastingdienst and asking for this extension. Certified and registered tax consultants can request a further extension until May 1 of the second year after the applicable tax filing year, if required.
Tax interest
If you have to pay income tax to the Belastingdienst, do keep in mind that interest will be calculated if the tax assessment has been imposed after July 1 of the following year. If you want to prevent such interest, make sure that your tax return is submitted before April 1. In that case, the Belastingdienst will produce your (provisional) tax assessment before July 1 - so no interest will be due.
Income tax rates
Income taxes in the Netherlands are progressive: the higher your income, the higher the tax rate. It has two brackets: The lower bracket rate is ± 37% and the higher bracket rate is 49,5%. The higher rate is applicable to gross annual income above ± 70.000 euros (69.398 euros in 2022 and 73.071 euros in 2023).
Social security premiums and wage tax
Social security premiums are also levied through the income tax system and are part of the lowest income tax bracket. They include premiums for government pension (AOW), surviving dependent’s insurance (ANW) and certain special healthcare (Wlz).
In addition, every individual working in employment will be taxed with wage taxes on their salary payments. Wage taxes are a withholding (pre-payment) to income tax. The pre-paid wage taxes are deducted from the income tax due through the annual income tax return. If the wage tax withholdings were higher than the actual income tax due, a tax refund can be claimed.
Tax deductions
There are a number of costs that can be inserted in the income tax return and qualify as tax-deductible costs. The most well-known tax deduction in the Netherlands is mortgage interest paid for the mortgage on the primary residence. In the year of purchase of this primary residency, some other costs related to the mortgage are also deductible – such as the costs of the mortgage advisor, the notary and the property valuator.
Other Dutch income tax deductions are:
- Retirement annuity premiums
- Occupational disability premiums
- Medical expenses
- Donations to charities
- Paid ex-partner alimony
Unfortunately, study costs are no longer deductible as of the tax year 2022.
Tax refunds for expats
Specific and interesting tax refunds can be obtained by expats in their migration years. Individuals working in employment in the Netherlands who migrated to or from the Netherlands are commonly entitled to such a tax refund.
The main reason hereto is that social security premiums are generally withheld through the wage tax system based on full year employment. However, such social security premiums are only due pro rata for the period in which the individual was a resident of the Netherlands. Thus, the excess social security premiums can be claimed back via the income tax return.
Erik Jan Peffer is a tax lawyer specialised in the taxation of cross-border labour and the founder of Taxt. Need professional help with filing your Dutch income tax returns? Email them at [email protected] or call +31 20 820 0 810 and they will gladly assist you.