pERSONAL INCOME TAX
PERSONAL INCOME TAX REQUIREMENTS IN THE NETHERLANDS
If you live in the Netherlands or receive income from the Netherlands, you will be subjected to pay income tax in the Netherlands. You pay tax in the Netherlands on your income, on your financial interests in a company and on your savings and investments.
This means, 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 an individual)
There is a legal requirement in the Netherlands to obtain a certain amount of salary when a shareholder (>5% shareholding) also acts as director. This is the so-called DGA-salary. 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 the tax credit in your country of residence.
In the Netherlands you can apply for an ex-pat- 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.
As a shareholder you are taxed in the country of your residence, 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 homeownership, and includes the following:
Employment income (company car can be considered as such)
Homeownership of a principal residence (deemed income).
Periodic receipts and payments.
Benefits relating to income provisions.
Box 2 refers to taxable income from a substantial interest, and box 3 applies to taxable income from savings and investment.
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)
Personal Withholding taxes and Social Contributions
Based on your personal situation, our accounting team can determine the exact personal withholding taxes that might be relevant. If you are on the payroll of the Dutch company, we can prepare a wage tax calculation, providing you a full understanding of the related taxes. Of course, this is only relevant when you are on the payroll, which we can postpone in case the company is not making a profit yet.
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)
When we calculate your personal income (withholding) taxes, we will also consider the 30%- ruling which applies for expats, which have come to the Netherlands for the first time to perform a job.
In most cases, the withholding tax on the salary can also be considered the final income tax. meaning, when you file the personal income tax return at the end of the year, it’s not expected that you have to pay extra tax. This can vary, and will depend on extra possible jobs or income you might have, or an incorrect calculation of the withholding tax (for example, wrong tax incentives have been considered).
In case you/the employee is NOT resident in the Netherlands, no social contributions are due. Only the actual taxes. As you might know, most of the progressive tax rate of 52% consists of social contributions. This means that non-residents pay a much lower rate, in the area of 8-10% on their income. We can assist you to determine if this lower tax rate is applicable.
FILING YOUR PERSONAL INCOME TAX RETURN(S)
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.
Please read more here about when to file your personal income tax return.
Even if the Tax and Customs Administration has not sent you a provisional assessment you may still be required to file a tax return.
To determine whether you need to pay tax or are entitled to a refund and if so, how much, you can use the services of our accounting team who can provide you an exact calculation.
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