INDIVIDUAL TAXATION

Residents are taxed on worldwide income. Married couples are taxed separately for their earned income in past or present employment while income from other sources may be freely attributed to one spouse. Spouses living permanently apart are taxed separately on all income. Income of the children is taxed in the hands of the parent who maintains the children.

In general, EU citizens have a choice whether to be taxed as a resident or a non-resident in the Netherlands. Non-EU nationals on the other hand are considered residents for tax purposes within six months of residency in a tax year.

PERSONAL INCOME TAX (The ‘Box’ System)

Under the Dutch tax system, there are three categories or boxes of taxable incomes and each box has its own tax rate:

Box 1: taxable income from work and home ownership, profits, social security benefits and pensions

Taxable income under Box 1 category includes past and present employment, business activities, other activities (cannot be considered employment or business), periodical payments and pensions from individuals (e.g. alimony) or insurance institutions, periodical payments received from the state and other public institutions (e.g. old-age pension), and owner-occupied dwellings. Income from all sources mentioned is aggregated before deductions and tax credits are deducted. Income is then taxed at progressive rates.

Included in the tax rates for the first two tax bands are national social security contributions, which is 31.15%. The actual income tax rates for the first two tax bands are 2.45% and 10.7% respectively. The tax rates for the last two tax bands do not include any national social security contributions.

Included in the tax rates for the first two tax bands are national social security contributions, which is 13.25% for taxpayers over 64 years of age. The actual income tax rates for the first two tax bands are 2.45% and 10.7% respectively. The tax rates for the last two tax bands do not include any national social security contributions.

Box 2: taxable income from a substantial shareholding

Taxable income under Box 2 category includes dividends and capital gains from a substantial shareholding. Income that falls into the Box 2 category are taxed at a flat rate of 25%.

Box 3: taxable income from savings and investments (viz. real estate)

Taxable income under Box 3 category includes income from savings and investments. A flat tax of 30% is levied on the deemed yield of the net assets

RENTAL INCOME
If a property is rented out, the taxation will take place in Box 3 at flat rate of 30% based on the assumption that a taxable yield of 4% is made on the net assets. The effect is an annual tax of 1.2% on the value of the assets.

CAPITAL GAINS
Capital gains are generally not taxable. If sale of real estate is part of a business enterprise, capital gains are taxed as part of income in Box 3 at a flat rate of 30% on the deemed yield of the asset.

PROPERTY TAX

Real Estate Tax

Real estate taxes (onroerendzaakbelasting) are based on the value of the property and are paid by both the owner and the user. Each municipality is entitled to determine its own tariffs for real estate taxes which are applicable for four years. The tariffs (owner and user tariff) for the real estate taxes are typically between 0.1% and 0.3% of the property value.

Other Taxes

Besides real estate taxes, municipal authorities levy other taxes and charges such as building charges that are related to building permits. Such charges can be very high so a critical review is advised before payments are to be made.

Other possible taxes include polder board taxes or land-draining rights, wastewater pollution tax and sewage system tax, sufferance tax, refuse matter tax, groundwater tax, ecological taxes and the energy tax. These taxes and their rates vary from municipality to municipality, so consultation with makelaar or notaris is necessary.