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Personal Income Tax requirements
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Personal Income Tax requirements

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Do you live in the Netherlands or receive income from the Netherlands? In that case you will be subject to income tax liabilities in the Netherlands. You might have to pay tax  on your income, on your financial interests in a company and on your savings and investments.


As an entrepreneur, running a Dutch company, it would mean that even if you live outside the Netherlands, you are legally required to file an Income Tax Return in case you receive (or are expected to receive) income, such as:


  • Involvement as a Director (salary)

  • Involvement as a Shareholder (dividends)

  • Real estate (owned as individual)


There is a legal requirement in Netherlands to obtain a certain amount of salary, when a shareholder (>5% shareholding) also acts as director. This is the so-called DGA-salary. You find a full article on this tax rule in our blogs. Aside from this requirement, it’s likely that you will obtain a salary, once your company becomes operational. Therefore you need to consider that this salary is taxed in the Netherlands, although in most cases you are eligible for  tax credit in your country of residence.


In the Netherlands you can apply for a expat- tax credit (the so-called 30% ruling) in case you will be on the payroll of the Dutch company, earning a certain minimum amount of salary. We also further explain this ruling in this fact Sheet, and on our blog.


As a shareholder you are taxed in the country of your residency, however a withholding tax on your received dividends might apply. In many cases your involvement as a shareholder can be a reason for the tax authorities to send you an invitation to file your Dutch tax return, focused on any salaries or dividends you might have received.


In the Netherlands, worldwide income is divided into three different types of taxable income, and each income type is taxed separately under its own schedule, referred to as a 'box'. Each box has its own tax rate(s). An individual's taxable income is based on the aggregate income in these three boxes.


Box 1 refers to taxable income from work and home ownership, and includes the following:


  • Employment income (company car can be considered as such)

  • Home ownership of a principal residence (deemed income).

  • Periodic receipts and payments.

  • Benefits relating to income provisions.


Box 2 (taxable income from a substantial stake in a limited company)


You pay tax on income from your wealth, including savings, shares and a second home. It is calculated as the value of all assets (such as savings and shares) minus any debts. Part of your wealth is not taxable: the capital yield tax allowance. You pay 30% tax on your taxable income from savings and investments. The government assumes a fixed return, which varies, depending on your savings and investments.

For the year 2019 the tax rate for income from a substantial interest is 25%.


Box 3 (taxable income from assets)


The tax rate for income from savings and investments stays 30%. Expats with the 30% ruling can opt in the tax return to be exempted from taxation on savings and most of the investments.

Personal Withholding taxes and Social Contributions

 

Based on your personal situation, you can make a calculation on the amount of taxes and social contributions that you will need to pay.


There are several scenarios:


  • You live in the Netherlands, and you work in the Netherlands for a Dutch company (fully taxed in NL)

  • You live outside the Netherlands, and you work for more than 6 months in the Netherlands for a Dutch company (fully taxed in NL, unless you have a A1 certificate stating you pay social contributions in another EU country (or treaty country))

  • You live outside the Netherlands, and you work for a overseas company who runs a project in The Netherlands ( payroll in the Netherlands might not be required, depending if the local presence can be qualified as a permanent establishment). If you will be on the payroll in the Netherlands, scenario 2 might be applicable, even if the project runs shorter then 6 months.

  • You work for a Dutch company without presence in the Netherlands, and are resident outside the Netherlands (payrolling is not required in the Netherlands, not even for managers)

  • Other possible scenarios can apply


Once it is determined that you will (have to) be on the payroll of the Dutch company, you can calculate the Employer's costs (which is also interesting if you will effectively be your own Employer), and calculate the difference between the gross and net income. There are convenient and free tools for this, that anybody can use.


At this page, you can enter your gross monthly salary, and it will calculate the extyexpect nett salary: https://www.berekenhet.nl/werk-en-inkomen/bruto-netto-salaris.html

At this other page, you can calculate the full employers costs, based on a certain gross salary. At the moment, it's not possible to apply the 30% ruling for this calculation.

The Netherlands has a minimum wage requirement to employ staff, but there are also certain restrictions on taking a minimum salary, while paying out high dividends (which would cause a tax advantage in most cases). (See DGA-salary requirement)


How do the Dutch salary withholding taxes work?


The Dutch salary taxes are considered quite complex. It’s not typical that entrepreneurs will deal with these wage tax matters themselves, and there are many service providers online that can help you with this.


To explain you how the Dutch salary taxes work, it might be best to show an example.

For example; The employee will be on the payroll for at least 4.616 EUR gross salary(which is also considered the minimum wage for Highly Skilled Migrants, who wish to obtain residency in the Netherlands). This means that the salary slip will look like this (assuming the employee is eligible for the 30%- ruling):

- Gross wage € 4616
- Social security charges € 574
- Total employer's costs € 5186                        
- Total received in bank account (nett): 3.847
- Difference between Total Expenses and nett income: € 1.339

These taxes/contributions are slightly lower, if the employee will work for less than 6 months in The Netherlands. Because in that case, they will end up in a lower (progressive) tax bracket:

- Gross wage € 4616
- Social security charges € 522
- Total employer's costs € 5186
- Total received in bank account (nett): 4094 EUR
- Difference between Total Expenses and nett income: € 1092


Social Securities (Convention)


These total employers costs would be lower, if the applicant is resident in a country which has a Social Security Treaty/Convention. See a full list here.

In case of a Treaty country, the numbers look like this:

Gross wage € 4616
Total employer's costs € 4616                   
Total received in bank account (nett): 4302,57

The social contributions are based on sectorcode 45 (business services), this might vary per industry (2020).

This means that the actual tax expenses in this latter scenario, are only 314 EUR!

In case there is no social security convention, the total tax expenses will be 1.339 (lower amount applies in case the residency will be shorter than 6 months, see above)

Salary taxes in the Netherlands

 

Employers in the Netherlands have to calculate and pay salary taxes on the salary of their employees. Salary is everything the employee receives for their work, for example:

  • Wage

  • Holiday allowance

  • Overtime pay

  • Year-end bonus

  • etc

Employers can also pay their employees in kind, for example with meals. On top of this employers can also grant their employees entitlements, reimbursements and provisions.

In the Netherlands salary taxes consist of the following elements:

  • Wage tax (loonbelasting)

  • National insurance contributions (premie volksverzekeringen)

  • Employed persons’ insurance contributions (premies werknemersverzekeringen)

  • Income-dependant contribution pursuant to the health care insurance act (inkomensafhankelijke bijdrage zorgverzekeringswet)


Wage tax


Wage taxes are withheld on the wage of the employee. This is an advance levy of the Dutch income tax. The amount of wage tax due is dependent on the amount of income of the employee.


National insurance contributions


National insurance schemes can be considered social security schemes that insure all residents of the Netherlands against the financial burden of, for example, old age, death and children. The schemes consist of:

  • General old-age pensions act (Algemene Ouderdoms Wet)

  • Surviving Dependants act (Anw)

  • Long Term Care Act (Wet langdurige zorg, Wlz)

  • General Child benefit act (AKW) (optional)


Employed persons’ insurance contributions


Employed persons’ insurance contributions are obliged by Dutch law. These schemes protect employees from the financial burden of, for example, illness and unemployment. the schemes consist of:

  • Sickness Benefits Act (Zorgverzekeringswet)

  • Invalidity Insurance Act (Wet arbeidsongeschiktheid) / Work and income according to Work Capacity Act (WIA)

  • Unemployment Insurance Act (Werkloosheidswet)


Income-dependant contribution pursuant to the Health Care Insurance Act (Zvw)


In the Netherlands, all employees are required to have health care. Therefore they will pay a contribution to a health care insurer. In addition to this, employers are obliged, according to the Health Care Insurance Act (Zvw), to pay a contribution as well. The amount of taxes due are depending on the income of the employee.


The above-mentioned elements are applicable to all employees working in the Netherlands. For employees working in the Netherlands but residing outside of the Netherlands (more than 150 km from the border and some other requirements) the 30% ruling can be applied. See our article regarding this subject.


We can help you figure out whether these contributions are due or whether you or an employee are entitled to the 30% ruling.


Underneath is an example of the 30% ruling with the minimum wage of € 4.500 for highly skilled migrants. (2019 rates):



The Holiday Pay could theoretically be waived by the employee, especially if the employee if also the employer

How to file your personal income tax return in the Netherlands

 

As an employee you are will receive your salary on a monthly basis. This means that salary/wage taxes are also paid on a monthly basis, via withholding on your gross salary.


Entrepreneurs (Sole Proprietorship/Eenmanszaak) you will have to file a personal income tax return. Withholding taxes are not relevant, however, it can be expected by the Dutch tax Authorities that an estimated tax assessment is paid during the year (this is only the case when the Dutch tax Authorities have issued a preliminary assessment).


Everyone is required to file their Income-tax return yearly. Even when the Dutch tax Authorities have not sent a provisional assessment it is still possible that you are required to file a tax return.

When to file your income tax return?

 

Everyone living or working in the Netherlands is invited to file an income tax return, after the financial year is ended. When you are working in the Netherlands, it is possible that the Dutch Tax Authorities are not aware of your employment. In this case, you will not be invited to file a tax return. However, you are obliged to file a tax return.


For entrepreneurs this is different. When you start a business, you will have to register your business with the Dutch Chamber of Commerce. The Chamber of Commerce will inform the Dutch tax Authorities about your registration. The Dutch tax Authorities will issue a RSIN number. With this number, you can file all tax returns that are necessary, for example, VAT, Wage tax and income tax.


Income tax


For income tax, the fiscal year runs from the first of January to the 31st of December. The Dutch tax authorities provide a time frame in which the income tax return can be submitted. Mostly this is from the first of March until the 30th of April of the following year. For example; the income tax return of 2018 had to be submitted before the 30th of April 2019. Further extension is possible, however, the request must be submitted before the deadline.


In The Netherlands different kind of forms are available, depending on the taxpayer’s situation. The most common forms are:


  • P-form: This form is applicable for people in a regular employment situation and has their residence in The Netherlands;

  • M-form: This form is applicable for people who resided in The Netherlands for only a part of the fiscal year;

  • C-form: this form is applicable for people who don't reside in The Netherlands, but do earn income from The Netherlands;

  • W-form: this form is applicable for people who are self-employed.


Your personal income tax return  should have been filed before 1th of May 2019, therefore you can no longer request a postponement for this

In case you wish to apply for an extension of the filing date (next year) then you can request this in writing (before the 1st of May, or any later date of filing, if that is communicated on the tax invitation letter)


Requesting extension requires the following steps:

  1. Download the form 'Application for deferment of income tax return'.

  2. Fill out the form on your computer and print it.
    You will then be sure to provide us with all relevant information.

  3. Send the form by post to the address on it.

Download the Postponement Request form


Are you a non-resident taxpayer?


Then apply for a postponement before July 1, 2020. You will then receive a postponement until November 1, 2020.

Use  this form: 'Application for postponement of income tax return'.


Or call the ‘Tax Hotline for Entrepreneurs'. Keep your BSN at hand, for quick support. Call (055) 5 385 385 or from abroad +31 555 385 385.


Payment


At first, you will receive a preliminary assessment from the Dutch tax authorities, which is based on the filed tax return. this preliminary assessment has not been checked by the Dutch tax authorities yet. After they have checked the return, a final assessment will follow. In both of these assessments, the payment details are stated.


You pay tax interest on an assessment to be paid


The Dutch tax authorities have taken (temporary) measures to mitigate the consequences of the coronavirus. For example, we temporarily lower the tax rate to 0.01%. For the income tax, the reduction will take effect from 1 July 2020. Read more at The corona virus - see what the consequences are for you


Did you receive a tax assessment to be paid after 1 July 2020? Then you pay 0.01% tax interest on this from 1 July. Read more about this under  Tax interest rate .

In which country do you have to file your tax return?

 

When you live and work in the Netherlands you will have a resident taxpayer status. Living abroad and having any kind of income from the Netherlands on which the Netherlands is allowed to levy taxes, you will, most likely, have a non-resident taxpayer status (please see our article regarding this subject). In both cases you are obliged to file an income tax return in the Netherlands, these tax returns are different from each other.


In some cases, it is possible that two countries want to levy tax on the same income. When the Netherlands has concluded a tax treaty with this country, this treaty will explain which country can levy on that income (please see out an article regarding this subject).

 
 
 
 
 
 

 
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