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Wealth Tax in the Netherlands

Wealth Tax in the Netherlands

Dutch citizens and foreign nationals living in the Netherlands are subject to similar taxation rules, however, they can also benefit from some of the most appealing allowances in Europe. One of the taxes that needs to be paid by private individuals is the wealth tax.

The wealth tax in the Netherlands is levied on various assets held by both Dutch and foreign nationals and our local specialists can offer detailed information on how this levy is applied.

We offer full Dutch company formation and accounting services to local and foreign citizens with various activities in this country, therefore we invite you to ask if you have any questions related to the wealth tax.

Types of incomes entering the wealth category in the Netherlands

In order to be taxed, an individual is required to file his/her tax returns with the Dutch Tax Administration, following which the levy will be imposed.

In order to be imposed the wealth tax in the Netherlands, one must first file the income tax under the Box tax system which covers three main types of incomes associated with the source of money. Under this system, wealth corresponds to Box 3 which covers the following categories of income:

  • – savings;
  • – property ownership;
  • – investments.

Just like in the case of the income tax applied on employment earnings, the Dutch wealth will be levied differently on residents and non-residents in the Netherlands.

If you want to open a company in the Netherlands, you should know that you can be taxed as a shareholder and benefit from various advantages which can be explained by our company registration advisors.

Determining residence for the wealth tax in the Netherlands

Just like in the case of other incomes where the residence of the taxpayer must be established, the same applies when it comes to the wealth of an individual. The Netherlands has specific regulations applicable to residents and non-residents with the mention that foreign citizens who acquire Dutch residence visas benefit from many advantages from a taxation point of view.

Just like in the case of income of employment or other sources, when it comes to the wealth tax in the Netherlands, the same residency principle applies: Dutch citizens and residents are taxed on the worldwide wealth, while non-resident on the income generated in this country. What should be noted is that domicile is not considered when establishing tax residency under the Income Tax.

In the case of non-residents, an important factor used for the determination of tax residency is the connection to the Netherlands and the ownership of the assets in this country.

For the wealth tax, real estate, company share ownership, and savings are considered when establishing residency.

If you need information on how to determine whether you are imposed the wealth tax in the Netherlands or your home country, you can verify the eligibility criteria with our specialists.

Wealth tax reporting requirements as a Dutch resident

The Netherlands is a very appealing country for starting a business or having a job which is why most foreign citizens relocating here apply for residency. Once they do that, they will be subject to the same taxes as Dutch citizens.

When it comes to the wealth tax in the Netherlands, residents must report the following upon filing their tax returns:

  1. savings, no matter if these are held in local or foreign bank accounts;
  2. investment accounts which will be subject to the wealth tax based on the amount;
  3. cash savings must also be reported in the tax returns of the taxpayer;
  4. real estate ownership (apart from the dwelling place which is taxed separately);
  5. assets, such as company shares and trust funds which are taxed under specific rules.

It should be noted that Dutch residents will be imposed the wealth tax on their worldwide income derived from the above-mentioned sources.

Our company formation consultants in the Netherlands can offer more information on the taxation of company shares as assets considered for the wealth tax.

Non-residents and the wealth tax in the Netherlands

Foreign citizens who have made profits in the Netherlands without being residents of this country will pay the wealth tax on the income obtained here. However, they are required to report the income to the Dutch tax authorities and to the tax agencies in their countries, as some incomes can be taxed twice – a situation which can be avoided if a double tax treaty is in place. The Netherlands has one of the most extensive networks of double taxation agreements in Europe.

Wealth tax rates in the Netherlands

The personal income taxation system in the Netherlands is based on progressive rates which can slightly vary from year to year.

Out of the income tax, the Dutch wealth tax represents only a fraction when it comes to the rates imposed, as it follows:

  • – the first 30,360 euros are exempt from taxation in the Netherlands;
  • – 0.58% is the wealth tax levied on an annual income raging between 30,361 and 102,010 euros;
  • – 1.34% is the wealth tax imposed on income between 102,011 and 1,020,096 euros;
  • – any amount surpassing 1,020,096 euros will be taxed at 1,68%.

There also a few particularities associated with the wealth tax in the Netherlands and one of the most important refer to the fact that it is calculated based on the assets declared in the tax return.

Another important aspect to consider when it comes to the taxes paid in the Netherlands is that if the wealth tax is applied, then there are no capital gains taxes levied on investments.

When it comes to real estate ownership, it should be noted that properties located in another country than the Netherlands will not be considered for the wealth tax here.

While other countries have the capital gains tax, the Netherlands has the wealth tax which from some points of view can be more attractive. Under Box 3, income can be taxed at a maximum rate of 30%, however, when a double tax treaty is in place, the rate can decrease substantially.

The taxation of savings in the Netherlands

Under the Box tax system, savings kept in local or foreign bank accounts by Dutch citizens are considered for the wealth tax in the Netherlands. These can refer to any amount of money kept in euros or other currencies.

Both local and foreign citizens are required to file tax returns based on which the calculation of the wealth tax relies.

Our local agents in the Netherlands can assist with various services, including tax-related ones.

Company share ownership in the Netherlands

One of the simplest ways of making money in the Netherlands is by purchasing shares in a company. However, this will attract tax obligations for the new owner who must pay the wealth levy under the Box tax system.

What should be noted is that for the purpose of the wealth tax in the Netherlands, the income is deemed as the net value of the assets. The income is then levied at a rate of 30%.

Real estate ownership for the purpose of the Dutch wealth tax

Owning a house or apartment in the Netherlands brings many benefits, however, it also attracts the taxation of using or letting or renting the said property. For this purpose, the wealth tax applies as a property levy and it is calculated based on several factors, among which the value of the property (the so-called WOZ). It should also be noted that this levy is different from municipality to municipality.

Buying a property in the Netherlands brings many benefits, as the real estate market here is one of the most appreciated by citizens in other European countries because of the facilities they can obtain upon purchase.

We can also help business owners interested in acquiring commercial real estate in the Netherlands.

The wealth levy and the Netherlands’ double tax treaties

The Netherlands has double tax agreements with countries all over the world. These enable foreign citizens and companies to benefit from fair taxation when it comes to the same type of income generated in two different states.

When it comes to the wealth tax that needs to be paid in the Netherlands, the levy applied on owning real estate here must be paid in this country, as most double tax conventions contain provisions on the taxation of properties in the state they are located in.

When it comes to savings and share ownership, the taxes paid in the Netherlands can be credited or deducted in foreign citizens’ home states, as long as similar levies are imposed there. However, it is important to note that each agreement has its own provisions.

If you need information on the Dutch wealth tax and its appliance under the country’s double tax treaties, you can obtain it from our accountants.

Wealth tax reductions in the Netherlands for 2021

At the end of 2020, the Dutch government has made various changes to the taxation system, one of the most important targeting the wealth tax.

Thanks to these amendments, a significant number of people will obtain wealth tax reductions in 2021. Saving and investments under Box 3 will be exempt from taxation on the first 50,000 euros, while savings that do not exceed 220,000 euros will benefit from lower levies. Also, people aged 18 to 35 who want to buy their first homes will be exempt from the property transfer tax. For those above 35 years old, the transfer tax will be levied at a rate of 2%.

If you need more information on the wealth tax in the Netherlands, please contact our local advisors.