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Tax Deductions and Exemptions in the Netherlands

Tax Deductions and Exemptions in the Netherlands

Individuals and companies in the Netherlands have plenty of benefits. From great living, respectively business conditions to tax exemptions and deductions, to name just a few, the Dutch authorities provide various advantages to both categories.

When it comes to taxation, there is one difference between the levies applied to residents and non-residents and it consists in the tax base. Residents are taxed on their worldwide income, while non-residents only on the income they make in the Netherlands.

When it comes to the tax deductions and exemptions available in the Netherlands, our local agents can offer detailed information. You can also rely on us if you want to open a Dutch company.

Incomes that can benefit from tax deductions and exemptions

From employment to corporate profits, all categories of taxpayers in the Netherlands can benefit from tax deductions or exemptions offered by the local authorities. While some of these are granted the same way for a number of years, other are available for short periods which is why when it comes to paying taxed in the Netherlands, one should seek for updated information.

An individual can obtain a tax deduction in the Netherlands for employment-related income or expenses. The same applies to a company that can obtain a deduction or exemption for various expenses or taxes.

If you need to find out whether you qualify for a special tax exemption in the Netherlands, you can discuss it with one of our specialists.

The general and employment tax deductions in the Netherlands

The general tax credit applies to all Dutch taxpayers, while the labor tax credit is available to employees only. It is not necessary to take any action in order to obtain either of the Dutch tax exemptions because the company will calculate and apply them to the tax balance on one’s salary.

In the case of self-employed people, the tax deduction is determined when they file their yearly tax returns.

Obtaining a tax deduction in the Netherlands is quite simple as all tax returns are filed electronically after an assessment was sent by the local tax office. However, if you consider you need support, our accountants can help you.

Tax deductions and exemptions for individuals in the Netherlands

A natural person can obtain a tax deduction on the following:

  1. public transportation when commuting for work from one city to another;
  2. expenses related to raising children (this is available for underage children only),
  3. temporary inability to work (the medical expenses can be deducted),
  4. home ownership or rental expenses can also be subject to a tax deduction in the Netherlands.

When it comes to a tax exemption that can be obtained by an individual living in the Netherlands, any of the following can be obtained:

  • the labor tax credit,
  • the 30% advanced tax ruling (which is available for foreign employees of Dutch companies),
  • the general tax credit.

When it comes to applying for a tax deduction or exemption in the Netherlands, an individual must also meet certain requirements in order to obtain it. For this, one must file various supporting documents with the Dutch tax authorities.

Our company formation agents in the Netherlands can offer more information on how to apply for a tax deduction or exemption as an individual.

Healthcare benefits in the Netherlands

For those qualifying, there is also a healthcare-related tax exemption in the Netherlands.  The government provides a healthcare allowance to persons with low incomes. This is a regular payment to help cover the monthly premiums for Dutch health insurance.

You must fulfill the following requirements in order to be eligible for the Dutch healthcare allowance, along with your fiscal partner:

  • you are at least 18 years old;
  • you are insured under the healthcare system;
  • you are a citizen of the EU and hold a valid work permit or residence permit;
  • your income is eligible for this tax deduction;
  • you own assets that fall below the minimum threshold requirement.

Please note that the value of one’s income and assets is calculated on an annual basis. So, if you need guidance in establishing if you meet the requirements, please get in touch with our specialists.

For expats, their income will determine whether they are eligible for the healthcare allowance. It is also important to note that the Dutch tax authorities will treat differently households with two people with income and single persons.

Unemployment benefits

Another tax deduction available in the Netherlands is available for those who have lost their jobs. For this purpose, one must meet the following conditions:

  • they must have worked between 26 and 36 weeks in the Netherlands;
  • they are seeking employment actively;
  • they are under the age of 65.

Depending on how long one was employed before filing for unemployment, the length of the benefit varies. The Dutch government usually grants one month of unemployment benefits for every year of employment, with a minimum of 3 months and a maximum of 38 months (3 years and 2 months).

The value of the unemployment compensation is determined based on the salary made the year before losing one’s job. As a general rule, both Dutch nationals and foreigners with valid residence permits will receive 75% of their unemployment compensation for the first 2 months and 70% after this period.

Tax deductions and exemptions for companies in the Netherlands

When it comes to Dutch and foreign companies, these can benefit from a wider range of tax deductions and exemptions in the Netherlands.

Perhaps the tax deduction related to double taxation is the best known by foreign companies in the Netherlands. However, these can also obtain a tax exemption for a certain type of income, if the agreement with the Netherlands allows it.

When it comes to tax exemptions for companies in the Netherlands, there are also the following:

  • research and development activities-related exemptions,
  • the 30% tax ruling which also applies to companies hiring foreign workforce,
  • for private limited liability companies set up as small companies a tax exemption for the first 3 years of operations is available in the Netherlands.

The same rule related to filing various papers that justify qualifying for a tax deduction or exemption is also required in the case of companies.

Dutch businesses registered for VAT can also claim back this tax if they meet all the requirements imposed by the tax authorities.

Our Dutch company formation officers can offer updated information on the tax deductions and exemptions available for businesses in this country.

The tax deduction for new companies in Netherlands

Starting a business in the Netherlands comes with various benefits, among which the new company tax deduction. This is part of the entrepreneur allowance which implies that in the first 5 years as an entrepreneur, one can receive this tax break 3 times.

At least the following requirements must be met to qualify for this tax deduction in the Netherlands:

  • the entrepreneur qualifies for the self-employment tax credit;
  • the business owner did not claim the benefit more than twice in the previous 5 years;
  • the entrepreneur was not a business owner for at least one year during the 5 years prior to the respective tax year;
  • the business owner did not file any tax-free return on behalf of a BV company in one of the 5 years in question.

Why start a business in the Netherlands?

Tax deductions and exemptions are not the only reason to relocate or to start a company in the Netherlands.

According to the European Commission:

  • in 2023, the Netherlands’ GDP increased by 0.2% compared to the previous year;
  • for 2024, the economy is expected to grow by 0.4%;
  • in 2025, the Dutch economy is forecasted to pick up at a faster pace, with the possibility to grow by 1.6%.

The Netherlands remains one of the most prolific economies in Europe and if you need information on the tax deductions and exemptions offered by the government, you can ask for information from our representatives. You can also contact us if you are interested in starting a new business or expanding an existing one to the Netherlands.