Expatriate tax ebook - The Netherlands

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
A charge to Dutch tax is dependent on the facts and circumstances.

Residence
The taxation of individuals in The Netherlands is based either on residence or on certain Dutch source types of income.

Residents
A resident of The Netherlands is taxable on his/her worldwide income.

Non residents
A non resident of the Netherlands is only taxable on certain types of Dutch source income. The most relevant ones are employment performed in the Netherlands and real estate located in the Netherlands.

Income from employment
Wages are subject to Dutch wage withholding tax. The tax rate is similar to the Dutch income tax rates. Dutch wage withholding tax may be credited against Dutch income tax. Dutch wage withholding tax applies to all income from employment, including weekly wages, monthly salaries, annual salaries, bonuses, commission, director’s fees, non approved pensions and any other cash earnings or benefits in kind.

A non Dutch based employer is in principle not obliged to withhold this tax on wages. However, if that employer has a so-called permanent establishment in the Netherlands, there is the obligation to withhold. A non Dutch based employer may also voluntarily apply for withholding.

Source of employment
As mentioned above, where duties are performed in The Netherlands, any remuneration received in respect of these duties is treated as Dutch source income and subject to Dutch income tax, regardless of the expatriate's tax residence status (subject to the relevant double taxation agreement).

Benefits (in kind)
In general where the benefit is enjoyed in The Netherlands, a Dutch income tax charge will arise.

Expatriate concessions
A special tax regime applies to expatriates. If all the relevant conditions are met, 30% of the gross remuneration may be paid out free of tax to the expatriate. The effective top tax rate is then 36.4%, instead of 52%. In addition to this, several cost items may be reimbursed tax-free. Careful planning is worthwhile.

Relief for foreign taxes
Relief for double taxation may apply on the basis of tax treaties and/or the unilateral regulations for such relief.

Deductions against income
In The Netherlands, no deduction by the employee is allowed for business expenses. On the other hand, an employer has numerous possibilities to reimburse business related costs. The total salary package should, therefore, be established carefully.

A part of the employee insurance contributions is tax deductible. Pension scheme contributions borne by the employee are also tax deductible provided that the pension scheme qualifies for Dutch pension purposes.
Mortgage interest paid by the employee is tax deductible. Also, within certain limits, gifts, life insurance contributions and medical costs are tax deductible.

Information about The Netherlands:

introduction

facts and figures

basis of taxation

what taxes?

tax planning opportunities