Dutch tax system and income tax in the Netherlands

Our guide will help you discover taxes in the Netherlands. Learn about tax brackets, the box system, filing your tax return, and income taxes in the Netherlands.

Ivandzhelin

4 minute read

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15 Oct 2024

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Living

Navigating taxes in the Netherlands can be complex, whether you’re a resident or new to the country. Understanding how income taxes in the Netherlands work or how to file your tax return in the Netherlands will keep you informed and save you time and money. In this guide, we’ll break down the Dutch tax system, helping you understand what taxes you have to pay, how the box system works, and how to get tax refunds.

The Netherlands collects taxes based on residency. It’s important to know your residency because, as a tax resident, you are subject to Dutch taxation on your worldwide income, whereas non-residents are only taxed on certain Dutch-sourced income.

You pay taxes in the Netherlands if

• Your primary residency is in the Netherlands
• You live in the Netherlands for more than 183 days in a calendar year
• You’re employed in the Netherlands or earn additional income, such as from real estate or investments

If any of these apply, you have to pay taxes in the Netherlands. The amount you pay is determined by your income and assets.

You don’t pay taxes in the Netherlands if

• Your primary residence isn’t the Netherlands
• You live in the Netherlands for less than 183 in a calendar year

If you’re considered a non-resident taxpayer of the Netherlands, you only pay taxes on Dutch-sourced income, which includes employment or business activities in the Netherlands, Dutch real estate, investments, or interest from Dutch companies.

In the Netherlands, you need to pay several types of taxes. These include indirect taxes, such as VAT, on goods and services, which are added to the costs of the items you buy.

But there are also direct taxes which you have to pay as an individual. They vary based on your income and assets. Generally, the Dutch taxes you have to pay are:

• Income taxes
• Social security contributions
• Health insurance contributions

Additionally, you can also pay motor vehicle taxes if you own a car, municipal taxes, which vary depending on the city you live in, and inheritance and gift taxes, which vary based on who you’re inheriting from.

There are 3 types of income taxes in the Netherlands, which are known as Box 1, Box 2, and Box 3 income taxes, named after the boxes you have to check when filing your taxes. The source of your income determines which taxes you have to pay. Generally, earnings are split like this:

• Box 1: salaries (domestic and international), profits from self-employment, social security benefits, pensions, and income related to your main residence (Eigenwoningforfait)
• Box 2: dividends, capital gains, and substantial shareholdings (if you own at least 5% of the shares in a company)
• Box 3: income from savings, investments, and other forms of wealth, such as real estate

As income tax in the Netherlands is calculated based on the Box system, different rates apply depending on the type of income. The most relevant tax rates are those in Box 1, which include the salary tax. The Netherlands has a progressive tax regime in Box 1, meaning that the more you earn, the higher taxes you pay. Here’s an overview of the Dutch tax brackets for 2024:

• Up to €75,518: taxed at 36.97%.
• Above €75,518: taxed at 49.5%.

This includes both income tax and social security contributions, which are automatically deducted from your salary each month.

Are you moving to the Netherlands because you’ve been offered a job? You might be eligible for the 30% ruling that allows you to receive part of your Dutch income tax-free.

If you have items in Box 2, you’ll be taxed at a flat rate depending on how much you earned from dividends, interests, and shareholdings. From January 2024, there are 2 tax rates in Box 2 on interest:

• Up to €67,000: 24.50%
• Above €67,000: 33%

Box 3 is taxed at a flat rate of 36%, only on income you’ve earned through your savings and investments. But if your individual assets are below €57,000, you don’t have to pay taxes on them. If you have a fiscal partner and your joint assets are below €114,00, you also don’t have to pay taxes in Box 3.

Box 3 makes an exception for assets earned from green investments or savings. If your income comes from green initiatives, your tax-free allowance is up to €71,251 (individual) or €142,502 (with a fiscal partner).

Yes, you can get a tax return in the Netherlands if you have paid more taxes than required for the year. A tax refund occurs when your tax deductions, credits, or withheld taxes exceed your actual tax liability. Here are some common reasons why you might receive a tax return in the Netherlands:

• Overpaid income tax: Excess tax withheld by your employer or due to part-year work.
• Deductions and credits: Such as mortgage interest deductions, healthcare costs, charitable donations, and study/training costs.
• Work-related expenses: Unreimbursed expenses like commuting or job-related costs.
• Tax credits: General tax credits, labor tax credits, and others that reduce your tax liability.
• Part-year residency: If you lived in the Netherlands for only part of the year, use the M Form.
• Non-residents: Can claim refunds for overpaid tax on Dutch income.

Mortgage payments are tax-deductible and can reduce your taxable income in Box 1.

How to apply for a tax return in the Netherlands

1. File your annual tax return: You must file your tax return to claim any refund (typically between 1 March and 30 April for the previous tax year). You can do this through the Dutch tax authority’s online portal (Mijn Belastingdienst) or with the help of a tax advisor.
2. Review your tax information: When filing, make sure to provide details of all income, deductions, and credits. The tax authorities will calculate whether you are owed a refund based on this information.
3. Check for preliminary refund: In some cases, if you are entitled to a refund, you may be able to request a preliminary refund (voorlopige aanslag), which allows you to receive the refund throughout the year instead of waiting until you file your return.

When can I expect my Dutch tax return?

The Dutch tax authorities will send you a final assessment. If you are entitled to a refund, you’ll receive it within 3 months of applying for it.