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Personal Income Tax in the Netherlands

Personal Income Tax in the Netherlands

Starting a business or finding employment in the Netherlands is the desire of many foreign citizens from Europe and even other continents. The country is one of the most important economies in the world which makes it very appealing for those who want stability and predictability for their future.

Those who succeed to move to the Netherlands, which is not difficult to achieve, will need to consider a few important aspects, among which the payment of various taxes.

The most important levy to pay is the personal income tax in the Netherlands and below, our company formation consultants provide detailed information about it.

Types of incomes earned by natural persons in the Netherlands

Individuals who live in the Netherlands are subject to several levies that are gathered under the personal income tax. The tax is paid based on the activities performed by these persons and are determined after being entered into the Box taxation system.

The following types of incomes can be earned by residents and non-resident in the Netherlands:

  1. employment-related income ( wages, salaries, pensions and other benefits),
  2. real estate ownership-related income for those who own properties in the Netherlands,
  3. profit-related income from share or financial interest ownership in companies,
  4. savings-related income kept in bank accounts the Netherlands,
  5. income made outside the Netherlands which can be subject to special taxation rules.

Our tax advisors can offer detailed information on the taxation of individuals in the Netherlands. Also, those who want to make profits by starting a Dutch business can rely on our company registration specialists.

The payment of the personal income tax in the Netherlands

The personal income tax in the Netherlands is levied based on residency. This does not imply an important difference between the tax paid by those who live here on a permanent basis and those who have relocated here for a short and well-determined period, as the difference relies on the tax base of the payers.

Dutch residents are taxed on their worldwide income while non-residents will pay on the personal income tax on the money they earn in the Netherlands. The main resemblance between the taxation of both categories of taxpayers is that this levy is progressive and relies on the Box system.

Foreign citizens with activities in the Netherlands must also know that they can benefit from special tax rules under the numerous double tax treaties singed by the Dutch government. These target the income obtained by both natural persons but also be companies.

If you are interested in company formation in the Netherlands and the benefits resulting from having a business here, our advisors can provide all the required information.

Dutch personal income tax rates

The following rates must be considered when paying the personal income tax in the Netherlands:

  • – a 9.70% rate applies to incomes ranging between 20,711 and 34,712 euros,
  • – a 37.35% rate applies to incomes ranging from 34,712 to 68,507 euros,
  • – a rate of 49.50% applies to incomes over 68,507 euros,
  • – other rates levied under the Box 2 and 3 are 26.25%, respectively 30%.

An important aspect to consider is that these rates are subject to minor changes every year, as the tax base can slightly vary.

If you need updated information on the taxation of natural persons in the Netherlands, our accountants are at your service.

The computation of the personal income tax in the Netherlands

The persona income tax is levied after the taxpayers file their returns with the Dutch tax authorities. For this, they must complete their tax declaration in the Box system and wait for the assessment based on which they will pay the due amounts.

In the Netherlands, the tax year corresponds to the calendar year, which means the income obtained between January the 1st and December the 31st will be assessed when computing the personal tax. This is also the case of Dutch companies, however, in the case of individuals it should be noted that the tax declarations must be filed on the 30th of April at the latest in order to be subject to late payment penalties.

Other aspects to consider when paying taxes as an individual in the Netherlands are related to the levy of the real estate tax. Also, Dutch citizens, residents and non-residents can also benefit from various tax deductions and exemptions under the schemes created by the government.

For detailed information on the personal income tax in the Netherlands, you can ask our representatives. Also, if you have any other questions about taxation of natural persons or companies, we are at your service with updated information.