The Dutch tax system can seem complicated to expats, especially those living abroad for the first time or who just started receiving an income from the Netherlands. Our guide will break down the most common taxes you’ll encounter living here, 2024 tax rates, and most importantly: how to file an annual tax return.
Like most countries, Dutch taxes must be paid on time otherwise you’ll be fined by the Dutch tax administration/tax authorities – the Belastingdienst. To discourage everyone from not paying their taxes, the Belastingdienst increases the amount of the fine every year. Luckily most mandatory taxes are already incorporated in your income, insurance premiums, or rent amount. But some, like municipal taxes, are paid separately, so don’t forget to check out our blog on paying municipal taxes!
Government Benefits
Before getting into this comprehensive list, did you know that you could be eligible for government benefits (toeslagen in Dutch)? If you have a low income, this contributes to your rent, health insurance, or child-related costs. Take a look at our blog post about Toeslagen to know more.
Have a Dutch Bank Account
To be able to pay any tax in the Netherlands, you need a Dutch bank account. To open one, you will also need a Dutch social security number (BSN number), which signifies you as a registered resident of the Netherlands. This number is necessary for employment contracts and applying for health insurance, making sure the government knows how much income you receive and can tax you appropriately.
Need help applying for a Dutch bank account? We’ve got you covered!
Income Tax (Inkomstenbelasting)
Otherwise known as wage tax, everyone who works in the Netherlands will pay income tax when they receive income here. Like most countries, the amount of income tax you have to pay depends on how high your income is. There are two tax brackets which inform you what the taxable amount of your income will be:
Two Tax Brackets
36,97%
If your income is equal to or less than €75.518 per year
49,50%
If your income is more than €75.518 per year
For most employees in the Netherlands, if you’re employed by a company, your employer calculates the rate for you and subtracts the income tax from your salary. The pay slips you receive from the company will break this down for you. Are you self-employed? Then you must calculate the income tax yourself and pay it through the annual tax return.
Important to note: the tax rates are lower if you’ve reached or will reach state pension age in 2024. Does this apply to you?
Box System for Taxable Income
Aside from income earned, it is possible you might have other income sources, like interest and capital gains. The Dutch tax system is based on ‘boxes’, with each box corresponding to a different type of taxable income:
Income that falls into box 1 includes:
- Income from business
- Salary, benefits, or pension
- Tips and other income
- Internship compensation
- That is not the same as an expense allowance. You do not have to pay tax on an expense allowance.
- Foreign income
- Income as a freelancer, childminder, artist, or professional athlete
- Periodic payments (such as annuity payments or spousal support payments)
- Negative personal allowance
- Refunded premiums for annuities and the like
notional rental value - Home endowment insurance
Go to the Dutch government website to see the taxable income from Box 1.
We’ve already explained the tax rate for box 1 via the two tax brackets (see above). For boxes 2 and 3, we’ve included the corresponding tax rate. Click each box’s link to find out more about what each type of taxation entails, including what the tax deductible items are.
Payroll Tax (Loonheffing)
Payroll tax consists of the income tax (above) and national insurance contributions for Dutch pensions, allowances, and benefits. This is, again, withheld from your salary and paid for by your employer, so you do not need to pay anything yourself.
General Tax Credit (Loonheffingskorting)
It does sound like you are paying a lot of income tax, right? Fortunately, tax credits are applicable to every employee in the Netherlands. Once you start a new job here and build up your employee contract, the employer will give you a ‘Loonheffingskorting’ form to fill out which applies a sort of ‘discount’ on your income tax contributions.
Important to remember: if you have multiple jobs in the Netherlands, the tax credits can only be applied to one employer – meaning, you can only get tax deductions on only one of your income sources (earned income, not capital). So, choose wisely!
Expat Tax Break (Partiële buitenlandse belastingplicht)
For some expats who come to the Netherlands to work, you may not need to pay tax on up to 30% of your income (‘30% facility’ or ‘30% bewijsregel’). This legislation was put in place for workers who may experience a higher cost of living than what they were used to in their previous country. This tax break can only be applied up to a maximum of 5 years. Read the conditions and apply for the expat tax break below (in English).
Inheritance Tax (Erfbelasting)
Are you going to be inheriting a substantial amount of money, property value, or even a business? Then you may be required to pay taxes on what you inherit. The tax rate depends on the value of your inheritance and your relationship with the deceased. On the official website of the tax and customs administration, you can determine the value of your inheritance and calculate how much inheritance tax you have to pay. We’ve added these websites below:
VAT or BTW in Dutch
The Value Added Tax (VAT) or sales tax only applies if you’re an entrepreneur in the Netherlands. You pay the Belastingdienst VAT on your turnover by charging your customers the necessary amount. Find out the exemptions to VAT tax in The Netherlands:
Do you live abroad as an entrepreneur and provide goods and services to the Netherlands? You may need to pay tax as a foreign entrepreneur. If you would like to know if this is applicable for you, check the Belastingdienst website and you will know right away!
Annual Dutch Tax Return
Provisional Tax Assessment
Every year, all taxpayers in the Netherlands complete an annual income tax return. To prepare for this, the Belastingdienst typically sends you a provisional tax assessment in Spring. It gives you an estimated figure of how much tax you must pay or get back from the previous year. For example, you’ll receive the provisional tax assessment in early 2024 for the year 2023 (the Dutch fiscal year runs from January 1st to December 31st).
Is the assessment incorrect? Or does it also need to include your deductibles or your tax partner’s income? Then you’ll need to declare a tax return on the Belastingdienst website to specify the income tax you paid in addition to personal financial aspects like additional income, savings accounts, investments, studies or healthcare costs, inheritance, and more.
Even if the tax assessment is correct, you’ll still need to make this declaration.
Filing a Dutch Tax Return
You should submit your annual tax return between March 1 and April 30 on the website of Belastingdienst. If necessary, you can request an extension via the Belasting telefoon or on their website.
What will you need for the tax return?
Here are the main necessities:
BSN number, bank account number, and DigiD
2022 Annual income statement (provided by your employer) or payslips
2022 annual overview of your savings, payment account, and investments (from your bank)
See the full list and what steps you need to take below:
Submit Your Declaration Online in 4 Steps
Step 1: Preparation
Find the right data and your documents. Think of your DigiD, account number, annual statement or the WOZ value of your home and so on.
Step 2: Log In
Log in to My Tax and Customs Administration. You log in with your DigiD. You are now in the My Tax and Customs Administration environment. Here you click on ‘Inkomstenbelasting’ and then on ‘Belastingjaar 2023’.
Step 3: Check
Verify your information. Compare the information already filled in for you with the information on your own papers. Fill in or correct what is missing or incorrect.
Step 4: Sign
Once you have completed the declaration in full, sign with your DigiD. Then click on the ‘Submit‘ button.
You are done when you see the ‘Ontvangstbevestiging‘ page.
Tax Penalty
For not requesting that a tax declaration be sent on time, the default penalty is 2,757 euros.
For late submission of an income, inheritance, or gift tax return, the default penalty is 385 euros. If you’re systematically late, the fine can increase up to 5,514 euros.
Taxes in the Netherlands
That’s a lot to remember! For most expats coming to Netherlands, the priority is on the income and municipality taxes. Fortunately, income tax is already deducted from your salary and you will be informed about the municipality taxes. Just make sure you have all necessary documents when the annual tax return period comes around.
You’ve got this!
