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Box System for Taxation in the Netherlands

Box System for Taxation in the Netherlands

The last serious reform brought to the tax laws by Dutch legislators was in 2001 when the Income Tax Act was announced. Even if this change was a good one, the forms which now need to be filled by individuals filing their tax returns seem quite complicated because of the boxes which have to be checked. This is how the personal income tax system is now known as the Dutch box system.

Below, our Dutch agents explain how the box system works. We can also help investors who want to open companies in the Netherlands.

The Dutch income tax boxes

There are 3 boxes on the income from which must be filed with the tax authorities by individuals paying their taxes in the Netherlands. These boxes correspond to the type of income of a person and are categorized as follows:

  • –          box 1 is for the income generated from employment and ownership of immovable assets, such as houses or apartments;
  • –          box 2 is for the income derived from a substantial interest, such as ownership of shares in a Dutch company;
  • –          box 3 is for income deriving from investments and savings.

We can offer accounting services to those seeking help in filing their tax returns.

Box 1 in the Dutch taxation system

Most Dutch citizens and residents need to fill box 1 which refers to the following taxable sources of income:

  • –          employment;
  • –          pension and other social benefits;
  • –          business and other profits and occasional benefits;
  • –          property ownership;
  • –          negative expenses on income from insurance and other allowances.

These incomes are taxes progressively and can reach a rate of 52%.

How does one fill box 2?

The Dutch box system contains a second box where the income from owning or disposing of shares in a Dutch company. The income from profit-sharing certificates must also be reported in box 2. These incomes will be taxed at a flat rate of 25%.

Box 3 in the box system in the Netherlands

The third box is related to the income deriving from income such as savings and investments, such as deposits, bonds, immovable property and insurance which is not exempt from taxation. These incomes are subject to a 30% tax rate.

For full information on the Dutch box system, please contact our local consultants. You can also rely on us for company formation in the Netherlands.