Whether a natural person is subject to Dutch income tax depends on his or her tax residence status and source of income. Income tax is levied at graduated rates on a person`s taxable income for the calendar year, which is calculated by subtracting allowable deductions from total taxable income. Extended business travelers may be taxed on income earned related to their Dutch working days. Dutch income tax can be triggered in the Netherlands from the first day of work, as the Netherlands has adopted the economic employer approach to interpreting the term “employer” in the paragraph on dependent personal services in tax treaties. * In the first step of box 1, the social security tax is levied at the rate of 27.65%. In the Netherlands, total income is divided into three different types of taxable income, and each type of income is taxed separately according to its own scale, called a “box”. Each box has its own tax rate. A person`s taxable income is based on total income in these three boxes. The Netherlands taxes both residents and foreigners on income earned in the Netherlands.

Resident taxpayers are taxed on their worldwide income, regardless of where it is earned. Foreigners are only taxed on income from certain sources in the Netherlands, such as work, attendance fees, business income or income from Dutch real estate assets. Dutch income tax is a progressive tax system with tax rates ranging from 9.42% to 49.50%. If your total annual income in 2021 exceeds $12,550 (per person) ($12,400 in 2020) or $400 of self-employment income, or only $5 of income if you are married but filing separately from a stranger, you must complete Form 1040. While any taxes you owe are still due before April 15, expats will receive an automatic renewal of the submission until June 15. If necessary, this can be extended online until October 15. Field 1 income is taxed differently depending on the amount you earn. See the table below for the rates that apply to your gross salary. Box 2 includes profits from a substantial holding, i.e. a holding of at least 5% in a given class of shares of a company resident in the Netherlands or abroad. Capital gains and current income (dividends) are taxed. The tax is levied at a flat rate of 26.25%.

This share will increase to 26.9% in 2021. The preparation of a high-quality tax return following appropriate tax planning should make it possible to apply these and other strategies to minimize or even eliminate tax liability. Keep in mind that in most cases, it is necessary to file a tax return, even if no taxes are owed. Extraterritorial expenses (i.e. additional expenses actually associated with the stay outside the country or jurisdiction of origin) can be reimbursed tax-free. Box 3 Income includes income from savings and investments, including shares and bank accounts (excluding the value of loans relating to a principal residence) and income from savings accounts held outside the Netherlands. Non-resident taxpayers are only taxable on the net value of a property in the Netherlands or on profit rights in a company resident in the Netherlands. The value at the beginning of the calendar year of a taxpayer`s savings and investments is considered fixed income. This means that real income from savings and investments is not taxed (e.g. the actual rent from renting a property).

In the case of emigration or immigration during the year, the value is recalculated proportionally at the beginning of the year. The income covered in box 3 for 2020 is taxed at a fixed rate of 30%. There are different contribution rates for each social security law. There are various tax credits and deductions that can be applied to reduce the amount of tax owing. For example, the Netherlands offers certain non-resident taxpayers a “foreign tax credit” called the “30% rule”. This loan can effectively reduce the amount of taxes due by up to 30%. The Netherlands also has a value-added tax (VAT) of 21%, which is levied on most goods and services. However, there are a few exceptions, such as food, books, and accommodation. In the Netherlands, you pay taxes on your income, assets and assets. The Dutch tax system divides different types of taxable income into three groups, each with its own rate: Regional water boards (Waterschappen) have rates for flood protection (maintenance of and control of water levels) and clean water.

If you own land, buildings or nature reserves in the Netherlands – or if you live or use commercial premises – you have to pay an annual water tax (waterchapsbelasting). Capital gains are in principle exempt from tax. However, exceptions apply to the different tax rates applicable for 2020. In the Netherlands, public and private companies are subject to Dutch corporation tax on their profits. Inheritance tax and gift tax are levied on all immovable property inherited or donated by a person who was resident or considered resident in the Netherlands at the time of death or gift. Dutch nationals who emigrate from the Netherlands are considered to be resident in the Netherlands for 10 years after their emigration. A donation made by a former Dutch resident, regardless of nationality, who left the Netherlands less than one year before the donation is subject to Dutch gift tax. The tax is levied on an heir or beneficiary of the gift, regardless of his place of residence. Box 1 includes pensions, social benefits, wages, income from other activities, wages in kind (e.g. company cars), goods, bonuses and other periodic benefits. The income in box 1 is taxed at the progressive rate. A withholding tax of 15% is levied on dividends received from non-residents, unless the rate is reduced by an applicable double taxation treaty.

Non-resident taxpayers cannot deduct the Dutch withholding tax on dividends from the final tax payable. No other tax will be levied unless the shares represent a substantial participation, in which case income tax may be levied and withholding tax on dividends credited. Interest and royalties received by a non-resident natural person are not subject to withholding tax. However, interest is included in taxable income if the recipient has a substantial interest in the payer. From 2021, different regulations will apply to legal entities. The Netherlands has introduced the VAT system (at European level). Goods and services trigger a VAT rate of 0%, 9% or 21%. Special regulations apply if services or goods are supplied or shipped internationally. A VAT of 21% will be charged. This tax rate is lower (6%) for certain items, such as books and food.

Certain services and goods are exempt from VAT. Land transfer tax must be paid by a buyer when purchasing a property or business. The most common form of land transfer tax applies when a person buys a house or apartment whose rate is currently 2% of the value of the property. From 1 January 2021, people aged 18 to 35 who buy their first property in the Netherlands will no longer have to pay transfer tax. From 1 April 2021, the cost of this first property may not exceed 400,000 euros. The Income Tax Act contains the term “partner.” “Partner” means the spouse or registered partner of a taxpayer, unless the taxpayer is permanently separated. Unmarried adults who live together and are registered with the municipality at the same address are treated as partners for tax purposes if one of the following circumstances applies: If the extended business traveler is not covered by Dutch social security, the tax rate for taxable income up to 35,129 euros is 9.45%. Dutch income tax is levied on three categories (boxes) of income. Each box has its own rules for calculating taxable income, tax rates and exemptions.