Taxes in The Netherlands for Non-Residents: The Ultimate Guide
November 8, 2024
According to the latest World Happiness Report, the Netherlands is the sixth happiest country in the world. A significant reason for that is its excellent social security system. However, all that comes at the cost of high taxes.
Dutch tax rates are among the highest in the world. Spending over 40% of your income each year on taxes does take most of the fun out of an otherwise excellent lifestyle.
Luckily, that doesn’t have to be the rest of your life.
Whether you want to stay in the European Union (EU) or explore the rest of the world, you’ll find many countries competing for your tax residency, offering a range of tax benefits, among other incentives, in exchange.
Don’t know how or where to start? Don’t worry. Reach out to us, and we’ll create a holistic offshore strategy addressing all your concerns, needs and wants.
The Dutch Tax System
The biggest problem with the Dutch tax system is that it doesn’t even pretend to be easy to follow. It categorises income and tax deductions into three boxes. Each box comprises different types of income and the relevant tax cuts and benefits.
Let’s see what these Dutch tax boxes are all about.
Box 1 – Netherlands-Sourced Employment and Homeownership Income
Income in Box 1 includes salaries, benefits, pensions, business income, homeownership income, freelancing income and other income sources.
Deductions in Box 1 include social benefits, healthcare expenses and insurance.
Box 2 – Netherlands-Sourced Income from a Substantial Interest
Box 2 is relevant to shareholders, entrepreneurs and their family members since it includes dividends, capital gains on shares and similar income.
You are considered to have a substantial interest if you and your tax partner have at least 5% interest in a company’s shares or profit-sharing certificates.
Box 2 doesn’t usually have any deductions. However, if the deductible amounts in Boxes 1 and 3 are higher than income, you can deduct the excess in Box 2.
Box 3 – Netherlands-Based Investment Income and Real Estate
The income tax declared in Box 3 is also referred to as Wealth Tax. It includes your wealth in the form of Netherlands-based investments and real estate.
Deductions for Box 3 include debts related to Dutch assets.
The Netherlands has double taxation agreements with over 100 jurisdictions. These treaties also affect the tax liability of Dutch residents and non-residents.
Categories of Taxpayers in the Netherlands
The Dutch tax system is anything but straightforward. For tax purposes, the Netherlands categorises individuals as residents, non-residents, partial non-residents and qualifying non-residents.
The last category was designed for individuals who want to benefit from certain tax deductions and benefits enjoyed by Dutch tax residents despite being non-residents.
And, keeping in line with how complicated the Dutch tax system is, as of 1 January 2024, partial non-resident Dutch tax status was abolished with effect from 1 January 2025.
Employees who were granted the 30% ruling by 31 December 2023, can still benefit from the partial non-resident Dutch tax status until the end of 2026 based on transitional arrangements.
Let’s briefly discuss each category.
Dutch Tax Residents
Dutch tax residence is all about how closely your personal and corporate life is tied to the Netherlands. The Dutch General Taxation Act considers the following criteria, among other clauses, to determine your tax residency:
- Location of your permanent home
- Location of your employment
- Where your family resides
- Where you are registered with the local authorities
- Location of your bank accounts and other assets
- Physical presence in the Netherlands.
As an expat, you are generally considered a Dutch resident if:
- Your family accompanies you to the Netherlands (in case you’re married)
- You stay in the Netherlands for more than 183 days (in case you’re single).
Non-Resident Taxpayer
You are considered a non-resident taxpayer if you don’t reside in the Netherlands but have an income or assets there. This can include employment income, business profits, periodic benefits and Netherlands-based real estate income.
You won’t need to file an income tax return in the Netherlands if you live abroad and have no income or assets in the Netherlands.
However, declaring income from the Netherlands in your annual income tax return doesn’t necessarily mean that you have to pay tax in the Netherlands on all the stated income.
Qualifying Non-Resident Taxpayer
As mentioned earlier, the Dutch Tax Administration classifies income and tax deductions into three boxes. Usually, non-residents don’t qualify for these deductions. However, a non-resident can be entitled to certain tax deductions if they qualify as a qualifying non-resident taxpayer.
To be a qualifying non-resident taxpayer, you must:
- Live in an EU member state or Iceland, Liechtenstein, Norway, Switzerland, Bonaire, St Eustatius or Saba
- Pay salary or income tax on at least 90% of your worldwide income in the Netherlands
- Submit a personal income statement signed and stamped by the tax authority in your country of residence.
If you meet all the conditions except the 90% one, you are still a qualifying non-resident taxpayer if you:
- Receive a pension, annuity or similar payment, and:
- Don’t pay income tax in your country of residence because your income is too low.
Partial Non-Resident Taxpayer (30% Tax Facility)
The Dutch Tax Administration has a tax program known as the 30% Tax Facility under which certain expat employees may opt to be treated as partial non-residents for five years.
As mentioned above, this Dutch tax program has been amended as of 2024, and employees will now only receive their salary 30% tax-free for the first 20 months. After this, they will be eligible for a 20% tax-free for the next 20 months. And for the final 20 months, they will be eligible for a 10% tax-free.
Partial means they’ll be entitled to personal deductions and tax credits and treated as residents for Box 1 and as non-residents for Boxes 2 and 3 purposes.
To qualify for the partial non-resident taxpayer status, you must:
- Be transferred or recruited from outside the Netherlands
- Work for a Dutch tax-payer employer registered with the Dutch Tax Office
- Agree in writing that the ruling applies to you (along with your employer)
- Not have lived within 150 km from the Dutch border for the last 18 out of 24 months at the time of hiring
- Meet the minimum salary requirements (€46,107 annually)
- Demonstrate expertise scarcely available in the Netherlands.
Eligibility conditions are lenient for PhD and Masters graduates under 30 years, scientific researchers and medical specialists.
Tax Rates for Non-Residents in the Netherlands
So far, we’ve discussed the Dutch tax system, how it categorizes individuals for tax purposes, and taxable income related to each tax box. Each tax box also comes with its own tax rate.
Unlike countries, where non-residents’ income is subject to flat tax rates, or certain types of taxes, are exempt altogether, the Netherlands taxes its non-residents on their Netherlands-sourced income at similar rates applicable to the residents.
- Box 1 income is subjected to progressive tax rates ranging from 9.32% to 49.50%
- Box 2 income is taxed at a rate of 24.5% for the first €67,000 and 31% for the income above
- Box 3 income is taxed at a flat rate of 36%.
Why Establish Non-Residency in the Netherlands?
Right off the bat, there are many reasons to establish non-residency in the Netherlands.
The highly complicated tax system, paying taxes on worldwide income, the high cost of living, keeping track of all the tax boxes and the relevant tax rates – the list goes on. Not to mention that Dutch taxes are some of the highest in the world.
All that makes you wonder why not just live in a country where the tax regime is simple, the tax rates are low (or preferably zero), and the living conditions are similar, if not better.
To avail yourself of the full benefits of Dutch non-residency, you should reduce or eliminate your Netherlands-based income and assets considerably. The absence of Dutch income or assets may mean that you don’t need to file a tax return in the Netherlands at all.
Tax-Friendly Jurisdictions in the EU
The EU is associated with many things like travel freedom, excellent quality of life and thriving business and investment opportunities, but very few think of EU countries as tax-friendly. That’s not entirely true, though.
There are many EU countries with friendly tax regimes for people seeking tax residency.
Portugal
A top marginal rate of 48% sounds neither friendly nor low, so why is Portugal on this list?
Although not as appealing as the former Non-Habitual Residence (NHR) tax program, the new NHR 2.0 grants tax relief to active income earners involved in technical, scientific, or academic roles in R&D projects, academics and start-up companies.
The main benefit of the new program is a reduced personal income tax (PIT) rate of 20% for qualifying individuals. It also offers exemptions on various foreign income sources, including:
- Capital investment income (interest or dividends)
- Royalties
- Capital gains (awaiting regulations for clarity)
- Real estate income or gains.
Portugal boasts a high quality of life, thriving culture, and far better weather than the Netherlands, making it an excellent choice for ex-Dutch residents.
Read more about the Portugal Golden and the tax benefits here.
Italy
One of the most attractive tourist destinations in the world, Italy offers one of the highest living standards and breathtaking views.
Italy’s standard tax rates can go up to 43%. However, the country offers a lump sum tax regime to wealthy individuals who can pay €100,000 per year as their entire tax obligation.
Foreign individuals interested in Italy’s lump sum tax program must move to Italy, become a resident and pay €100,000 annually for up to fifteen years (or the term of their enrolment).
Doing so will exempt them from local tax obligations as well as inheritance, wealth or gift taxes in Italy.
The country also has an Italian Golden Visa program for people interested in acquiring EU residency through investment.
Tax-Friendly Jurisdictions Outside the EU
Georgia
Here at Nomad Capitalist, we love Georgia. Not only is it a beautiful country with breathtaking architecture and an overall laid-back vibe, but it also offers excellent incentives to foreign investors and entrepreneurs looking to establish tax residency there.
The Georgian tax is far more straightforward and friendly than the Netherlands. It also works on the territorial principle, meaning that foreign income is tax-exempt for Georgian residents.
If you’re up for moving beyond the EU, Georgia should be one of your top choices.
The following are the Georgian tax rates:
- Income Tax: 20%
- VAT: 18%
- Corporate Tax: 15%
- Capital Gains and Interest: 5%-20%
- Property Tax: 1%
Monaco
Monaco is not a full member of the EU, but it is a de facto participant in the borderless Schengen Area, offering excellent travel freedom.
Monaco’s proximity to France and the rest of Europe makes it an excellent tax residency option for people seeking non-EU jurisdictions right at the heart of Europe.
Monaco’s personal income tax still stands at a 0% tax rate, while its corporate income taxes are now set at 28%.
If you’re interested in getting Monaco residency or citizenship in Monaco, read more in our guide.
Taxes in the Netherlands for Non-Residents: FAQs
Taxes in the Netherlands can easily go over 40%, making it one of the countries with the highest taxes in Europe. Moreover, paying income tax in the Netherlands isn’t straightforward. You must assess all three tax boxes according to your income and then calculate your tax liabilities accordingly.
Yes, depending on their income sources and assets in the Netherlands, foreigners are subjected to income tax there.
The Netherlands employs a progressive income tax system. The current Netherlands tax rate ranges from 9.32% for income up to €38,098, 36.97% for income between €38,098 and up to €75,518 and 49.5% for income above €75,518. The standard VAT rate is 21%, with a reduced rate of 9% for essential goods and services and 0% for specific items.
The Netherlands corporate tax rate is 19% for taxable income up to €200,000 and 25.8% for income exceeding €200,000.
Dutch tax rates are progressive income and divided into tax brackets with escalating rates based on income levels.
Current income tax rates are 36.93% for income up to €73,031 and 49.5% for income above this. Income is categorised into three boxes: Box 1 (income from work and home), Box 2 (income from substantial interest) and Box 3 (income from savings and investments).
The deadline for filing income tax returns in the Netherlands is typically May 1st each year for the previous calendar year’s income.
Taxpayers can request an extension for filing their returns, which usually grants them additional time until September 1st, subject to approval. For companies paying Taxes in The Netherlands, the returns are generally due within five months after the end of the fiscal year.
Go Where You’re Treated Best
Income tax in the Netherlands can easily go over 40%, making it one of the countries with the highest taxes in Europe.
Gone are the days when you could elude establishing a tax residency and live as a true nomad, but if you must pay taxes, there are far friendlier countries to do so than the Netherlands.
The best way to avoid paying income tax in the Netherlands is to eliminate any income sources or assets there.
Once you’ve done that, the world is your oyster. You can go to any tax-friendly or zero-tax country where you can live a life of personal and financial freedom without paying nearly half of your wealth in taxes.
Eager to know your options? Reach out to us, and we’ll help you figure out your best way forward.
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