Income tax in the Netherlands (personal, rather than corporate) is regulated by the Wet inkomstenbelasting 2001 (Income Tax Law, 2001).
The fiscal year is the same as the calendar year. Before May 1 citizens have to report their income from the previous year. The system integrates the income tax with fees paid for the general old age pension system (AOW), the pension system for partners of deceased people (ANW), and the national insurance system for special medical care (WLZ).
There are three categories of income, each with their own tax rates. They are referred to as “boxes”.
Progressive tax on wages etc. (box 1)
There is a progressive tax on wages, social security benefits and pensions. Thus, there are tax brackets, each with its own tax rate.
For the year 2022, the tax rate and premiums for income from work and home are:
Combined rates in Box 1 for persons younger than retirement age
|Taxable income||Tax per bracket||Premium National Insurance per bracket|
|From||Up to and including|
National insurance premiums (premiums social security)
Total premium for the national insurance is 27.65% which is divided in:
- AOW (General Old-age Pensions Act ): 17.9%
- ANW (General Surviving Relatives Act): 0.1%
- Wlz (Act on long-term care): 9.65%.
Flat tax on income from a substantial business interest (box 2)
There is a flat tax of 25% on income from a substantial business interest, usually meaning a (direct or indirect) shareholding of at least 5% in a private limited company (BV).
If the fiscal partner of the taxpayer or a blood relative (first vertical kin) holds a substantial interest in a company, the shares of the taxpayer constitute a substantial interest, even if they do not amount to 5%.
Income from substantial interest includes:
- capital gains (except in case of succession and divorce).
Flat tax on savings and investments (box 3)
There is a flat tax on the total value of the savings and investments of 1.2% per year. It is nominally part of the income tax, as a 30% tax on a fixed assumed yield of 4% of the value of the assets (this is regardless of the actual income from the assets). EUR 21,139 (2012; higher for 65+ with a low income) of the value of the assets is exempted.
The amount of money invested in approved “green” investments (up to EUR 56,420) is exempted. A tax credit per year of 0.7% of the value is applied for these investments. The credit only counts towards box 3.
After the tax has been calculated based on the above percentages you can reduce the calculated amount with the applicable tax credits. These include:
- Personal tax credit (max for lower incomes) € 2,888
- Personal tax credit (max for incomes above € 69,398) € 0
- Personal tax credit for partner without income born after 1 January 1963 € 379
- Personal tax credit for partner without income born before 1 January 1963 € 2,837
- Labour tax credit (max for lower incomes) € 4,260
- Labour tax credit (max for incomes above € 69,398) € 0
If you have children additional tax credits can apply. There are also other specific tax credits depending on your situation but the above are the common tax credits.
Article 4 of the General Taxation Act prescribes that an individual’s residence position is determined based on all (relevant) facts and circumstances. In case of a dispute, the Dutch tax courts will examine the person’s durable ties of a personal (and, to a lesser extent, economic) nature with the Netherlands.
Under Dutch tax law, a number of criteria is used to determine the place of residence. The most important criteria include the following:
- Where a permanent home is maintained.
- Where employment duties are performed.
- Where the individual’s family resides.
- Where the individual is registered with the local authorities.
- Where bank accounts and other assets are maintained.
- The intended length of stay in the Netherlands.
An expatriate is generally considered a resident of the Netherlands if:
- as a married person, their family accompanies them to the Netherlands, or
- as a single person, they stay in the Netherlands for more than one year.
Election to be treated as part non-resident
Under the provisions of the so-called ‘30% ruling’, employees who are, based on facts and circumstances, considered as resident taxpayers may opt to be treated as partial non-residents. Partial in this respect implies that they are treated as residents for box 1 and as non-residents for box 2 and 3 purposes while they are entitled to personal deductions and tax credits.
Electing to be treated as a partial non-resident taxpayer does not override the residency determination principles based on tax treaties between the countries.
The maximum term of the 30% ruling is five years.