Persons residing in the Netherlands have to pay income tax based on their earnings. The income tax is sub-divided in three main categories:
∙ Taxable income from work and dwellings;
∙ Taxable income from substantial interest;
∙ Taxable income from savings and investments.
Taxable income from work and dwellings is an ascending scale with four brackets:
– 33.60% on the first EUR 17,579
– 41.85% on the next EUR 14,010
– 42% on the next EUR 22,271
– 52% on the remainder
Taxable income from substantial interest; This kind of income is charged at a fixed rate of 25%
Taxable income from savings and investments; This kind of income is charged at a fixed rate of 30%
Besides, all those who are in paid employment are subject to wage tax. The wage withholding tax consists of one amount made up of wage tax and social security contributions. The Netherlands levies social security contributions reserved for the old age pension (AOW), surviving relatives benefit (ANW) and exceptional medical expenses (AWBZ). Other tax categories such as income tax on world-wide income, environmental taxes, VAT for entrepreneurs and corporate income tax may apply.
Expatriates who come to live and work in the Netherlands need to pay tax as well. When you arrive or leave the Netherlands you do not need to pay tax for a full calendar tax year. Consequently an M-form (migration) must be filed. From then onwards the P-form (Private individual) comes into force and you will receive the same tax return as a normal Dutch citizen.
In general, tax returns should be submitted by April 1. However, extensions are possible if you cannot meet the deadline. Generally you will receive a tax return form whenever you owe money or when you are entitled for a refund. In case you do not receive the tax form by the 1st of August, you need to request the form yourself. When you don’t owe the tax office money you are not obliged to file a tax return form. However it is advisable to do it in case you are entitled for a refund.
How the system works
If you have been employed in the Netherlands, payroll tax is withheld from your salary each month. The income tax calculation is as follows.
Salary …………………………………………………..100,000
Income tax due on salary …………………………..42,000
Less: payroll tax on salary …………………………42,000
Balance …………………………………………………0
In the situation described above, when you were employed for a complete year, you would not have to pay additional income tax. When you don’t owe the tax office money you are not obliged to file a tax return form. However it is advisable to do it in case you are entitled for a refund.
In case you received income which has not been taxed yet, keep in mind that you are legally obliged to request a form and file a tax return.