In this article we’ll dive into Netherlands tax residency and also discuss how to end if if you plan to leave.
Overview Netherlands Tax Residency
- Factual assessment of tax residency
- Three income tax systems for different types of income
- Progressive income tax rates for professional income and income from significant shareholdings
- Taxation based on deemed rates of return for investment income
- Corporate tax rate of 25,8% but lower tax rate of 19% up to €200.000
- Potential exit tax upon ending tax residency
Tax Rules and Rates in the Netherlands
Let’s have a closer look at the Dutch tax rules and rates that apply in case of Netherlands tax residency.
Tax Residency Rules
You qualify as a Dutch tax resident when you have your permanent place of abode in the Netherlands.
This is a factual assessment based on multiple criteria. Some of the elements that the authorities take into account are:
- You spend most of your time in the country
- Your partner and family live there
- You have a home in the country
- You work in the Netherlands
- Your insurances are in the Netherlands
- Your general practitioner (doctor) is located in the Netherlands
- You are a member of a Dutch organization
Therefore, this assessment needs to happen on a case-by-case scenario and depends on how you organize your life.
Dutch Personal Income Tax
The Netherlands taxes you on your worldwide income if you qualify as a Dutch tax resident.
Regarding the actual tax rates that apply, they work with three systems or boxes depending on the nature of the income.
Box I: Professional income
- Tax rates:
- <€38.883: 8,10% (including public health insurance premium due on this income)
- €38.883-78.426: 37,56%
- >€78.426: 49,5%
- For elderly individuals who are 66 years or older lower percentages apply
- You can find more information here
Box II: Income – dividends and capital gains – from significant shareholdings (+5%)
- Tax rates:
- <€68.843: 24,5%
- >€68.843: 31%
- You can find more information here
Box III: Other investment income
- The tax is due on an assumed rate of return depending on the nature of the assets
- Rate of return:
- Bank deposits: 1,37%
- Other investments: 5,88% (e.g. stocks, real estate, cryptocurrency)
- Debts: 2,70%
- You get your taxable income by applying the rate of return for each asset class to the market value of the asset
- There is a deduction of €59.357 in asset value per taxpayer
- Tax rate: 36%
- Remark: the Dutch government plans a reform of the Box III regime
- You can find more information here
Social Contributions in the Netherlands
In the Netherlands you’ll also have to pay different types of social contributions.
National Insurance Tax
- The tax is calculated together with your personal income tax but in its nature it’s a social contribution
- The rate is 27,65%
- Due on the income that fits in the first income tax bracket. Therefore, the current maximum basis for the calculation is €38.883.
- Cover your public pension and cases of long-term illness
Employee Insurance Contribution
- Paid by the employer and not due by self-employed individuals
- Rate depends on the sector but ranges from ~10-18%
- Maximum basis for calculation is €79.409
- Covers sickness and unemployment benefits
Health Insurance
- Fixed fee of ~€1.900 per year paid by the individual directly to the insurer
- Employee: 6,10% withheld by the employer and paid to the authorities
- Self-employed: 4,85% paid via your tax assessment
- Maximum basis for percentage based contributions is €79.409
- Covers basic healthcare (e.g. doctor appointments, medicine, hospital)
Dutch Corporate Income Tax
The standard Dutch corporate income tax rate is 25,8%.
However, on the profit up to €200.000 the tax rate is 19%. The standard rate applies on any income above that threshold.
Dutch Expat Tax Regime: 30% Ruling
One way to save taxes if you have Netherlands tax residency is via the so-called 30% ruling.
Under this rule, you can receive up to 30% of your gross income as a tax free allowance with an absolute maximum of €78.600.
In order to qualify, you need to meet certain conditions:
- Work as an employee (can be for your own company)
- Lived at least 150km from the Dutch border for 16 out of 24 months before moving to the Netherlands
- Minimum taxable salary of €46.107; or €35.048 for people under 30 years with a master degree
You will have to file an application to qualify for the regime within four months of starting your employment.
The benefit is valid for five years after which you fall back into the normal tax rules.
How to End Dutch Tax Residency?
In order to end your Dutch tax residency you’ll have to make sure you no longer meet the criteria for tax residency.
As discussed before, tax residency is determined on a subjective and factual basis. In any case, it will be important to minimize any connections with the country.
You’ll also have to deregister with the municipality where you used to live.
Furthermore, you’ll have to file a final tax return (M-Form) with the Dutch Tax Authorities for the year you left.
In case you hold a significant interest in a company or pension rights, you might also have to pay an exit tax.
Although you can often defer the actual payment of the tax till the moment you actually cash out.
How is the Netherlands for Digital Nomads?
The Netherlands brings a few positive elements to the table for nomads:
- High English proficiency which will make your life easier; Dutch isn’t an easy language
- Many international cities
- Good internet connection and coworking scene
- Good travel hub
However, you might have a hard time finding affordable housing. Definitely, in popular places like Amsterdam, Rotterdam and Utrecht.
As a conclusion, I wouldn’t suggest to setup tax residency in the Netherlands if you can avoid it because of the high taxes and contributions.
Let Me Help You With Your Tax Setup
Reach out if you need help with your tax setup in the Netherlands or if you want to structure your international lifestyle!